PEE 201 Introduction to Petroleum Engineering Dr.

Ajay Suri

UNIT 1: Context, Introduction to Petroleum Engineering, Present and

Future Scenario

1.1 What is Petroleum & What do We Do with It

Petroleum is a crude oil mixture of hydrocarbons which is present in suitable rock strata. It
was naturally made from decayed plants and animals organic matter (geochemical analysis has
shown that oils and living organisms share similar molecules known as biomarkers) that lived
in ancient seas millions of years ago. It is extracted and refined using various technologies in
order to produce fuels for energy and materials for other usages. Petroleum engineering is the
application of science and technology that deals with petroleum extraction.

On average, crude oils vary in color, viscosity, density etc. and are largely made of the
following elements or compounds:
1. Carbon - 84%
2. Hydrogen - 14%
3. Sulphur - 1 to 3% (hydrogen sulfide, sulfides, disulfides, elemental sulfur)
4. Nitrogen - less than 1% (basic compounds with amine groups)
5. Oxygen - less than 1% (found in organic compounds such as carbon dioxide, phenols,
ketones, carboxylic acids)
6. Metals - less than 1% (nickel, iron, vanadium, copper, arsenic)
7. Salts - less than 1% (sodium chloride, magnesium chloride, calcium chloride)

The hydrocarbons in crude oil are composed of all types: alkanes, alkenes, alkynes,
cycloalkanes, aromatics, resins, asphaltenes etc. The number of carbon atoms in the different
chains can vary from 1 to more than 70. We refine this mix into more usable fractions in an oil
refinery using a distillation column.

In summary the end product from the refinery or a petrochemical plant is:
1. Different blends of fuels for energy and
2. Chemicals for other making other materials
Oil refinery and petrochemical industries are slightly different as oil refinery focusses on
getting fuels while petrochemical plants obtain petroleum intermediates for making other
products, 10 minute youtube video: https://www.youtube.com/watch?v=yvqSR3KeDt4

The most common example of fuel is petrol (known as gasoline in the west). Other fuels are
kerosene, diesel, jet fuel etc. In all these fuels, carbon is combusted with oxygen to produce
heat. This heat is converted to kinetic energy through engines such as reciprocating engines to
produce motion. The motion could be used in transportation or could also be used to generate
electricity

Other energy forms used are in power plants to produce electricity, heating of homes, cooking
by LPG or propane gas etc. We can see from the combustion of methane, how one mole of
methane produces 802 KJ of energy.

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1.2 Fractional Distillation

An oil refinery transforms crude oil into different fractions by heating it up to temperatures of
600oC. Most of the crude oil boils forming vapor. The vapor enters the bottom of a long
vertical column filled with trays or plates with holes or bubble caps like a loosened cap on a
soda bottle.

The vapors pass through the holes or gaps in the bubble caps. The column is hot at the bottom
and cool at the top.

The vapor rises in the column but keeps getting cooled. When it reaches a particular height
where the temperature of the column is equal to the substance/fraction’s boiling point, it
condenses to form a liquid.

The substance/fraction with the lowest boiling point will reach the highest point in the
column; while substances with higher boiling points will condense lower in the column.

The trays at the different heights collect the different liquid fractions.

The collected liquid fractions may pass through condensers, which cool them further and then
they are sent to the storage tanks or to further processing.

Only around 40% of crude is directly distilled to gasoline. However since gasoline is the
major requirement, other fractions are further processed to obtain more gasoline fraction.

The following fractions are obtained due to the difference in their boiling points (Ref:
https://science.howstuffworks.com/environmental/energy/oil-refining2.htm).

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1. Methane, ethane, propane, butane (petroleum gas, 1-4 carbon, <40 oC BP), often used to
make LPG for cooking
2. Naptha, 5-9 carbon with 60-100oC BP, further processed to make gasoline, as per
Wikipedia it is 5-6 carbon for light naptha with 30-90 oC BP, and 6-12 carbon for heavy
naptha, 90-200 oC.
3. Gasoline or as we call it in India as petrol (5-12 carbon, 40-205 oC), mix of alkanes &
cycloalkanes, mostly used for road vehicles
4. Kerosene (10-18 carbon, 175-325oC BP), mix of alkanes and aromatics, used in jet
engines, tractors and in making other material
5. Diesel (alkanes with 12 or more carbon, BP. 250-350 oC), used for motor diesel fuel,
heating oil and starting material for making other products
6. Lubricating oil – used for motor oil lubrication, greasing, 20-50 carbon, alkanes,
cycloalkanes, aromatics, BP: 300-370 oC
7. Fuel oil – used in industries as fuel, starting material for making other products, 20-70
carbon, alkanes, cycloalkanes, aromatics, BP: 370-600oC
8. Residuals: solid - wax, asphalt, tar, coke, starting material for making other products,
multiple-ringed compounds with >70 carbon, BP > 600oC

Courtesy: https://www.speakev.com/threads/how-much-electricity-is-in-a-gallon-of-
fuel.73713/#lg=thread-73713&slide=0

Refineries/petrochemical plants can change one fraction into another as per the demand using
one of the 3 methods:
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1. Cracking (breaking larger carbon chains into smaller chains)

a. Thermal (high temp, sometimes high P as well) steam at 816 oC breaks ethane,
butane, naptha into ethylene and benzene.

b. Catalytic cracking that uses a hot fluid catalyst such as zeolite, aluminium
hydrosilicate, bauxite and silica-alumina catalysts at 538oC speeds up the cracking.
Ex. heavy oil cracks into diesel and gasoline

2. Unification (combining smaller chains into larger ones)

a. Catalytic reforming that uses a platinum or platinum-rhenium mix to combine
naptha into aromatics needed in making chemicals and in blending gasoline. A
useful by-product is hydrogen gas.

3. Alteration (rearranging various chains into desired chains)

a. Alkylation is the process name in which for ex. propylene and butylene are mixed
in the presence of a catalyst such as HF or H 2SO4 acid and high-octane
hydrocarbons are obtained which are used in gasoline blends to reduce knocking.
Petrochemical feed stock such as ethylene and propylene can also be produced directly by
cracking crude without the need of refined products such as naphtha.

Cracking breaking the large carbon chains into smaller chains

The two most common petrochemical classes are olefins (including ethylene and propylene)
and aromatics (including benzene, toluene and xylene isomers). These chemicals are produced
by catalytic cracking.

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Petrochemical plant in the Kingdom of Saudi Arabia (from Wikipedia)

Petrochemical source (from Wikipedia)

Aromatics

Chemicals produced from benzene (from Wikipedia)

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PEE 201 Introduction to Petroleum Engineering Dr. Ajay Suri

Chemicals produced from toluene (from Wikipedia)

Chemicals produced from xylenes (from Wikipedia)

All the final fractions whether only distilled or chemically processed are treated to remove
impurities such as sulfur, nitrogen, oxygen, water, dissolved metals, inorganic salts. This is
done by passing the fractions through sulfuric acid which breaks carbon carbon double bonds,
nitrogen compounds, oxygen compounds and tars and asphalt. An absorption column filled
with drying agents removes water. H2S scrubbers remove sulfur.

Finally, after treating and cooling, blending is done to obtain gasoline of various grades,
lubricating oils of various weights and grades, kerosene of various grades, diesel fuel, jet fuel,
heating oil and chemicals of various grades for making plastics and other polymers.

Most scientists and engineers who work in the petroleum industry are:

1. Petroleum Engineers
2. Geoscientists
3. Mechanical engineers
4. Electrical engineers
5. Environmental engineers
6. Chemical engineers
7. Data scientists
8. Chemists/Physicists/Mathematicians etc.
1.3 The Current and Future scenario of Energy

1.3.1 Summary

The current world energy consumption is around 600 quad (1015) BTU. By 2050, it is
estimated to go up to 900 BTU mostly due to Asian markets as shown in the figure below.
Since energy is obtained mostly from the fossil fuels (petroleum, natural gas, coal and nuclear,
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PEE 201 Introduction to Petroleum Engineering Dr. Ajay Suri

this makes around 90%), the demand for petroleum (which is around half of the fossil fuel, the
remaining is coal) is likely to remain up in this long run.

Reference: https://www.globalpetrolprices.com/articles/39/

The world is trying to transit from fossil fuels to more sustainable energy sources such as
biomass, hydro, wind, solar, and geothermal. These are available in extremely huge quantities
as the life of the sun and heat in the earth is going to last for extremely long time.

Batteries could be used as an intermediate store house for renewable energy sources.
However, the extraction of raw materials used in batteries still has significant social and
environment cost. About 2/3rd of the world’s cobalt, comes from Congo and 20% comes from
unsafe working conditions and child labor. Battery production also carries large carbon
footprint. The global battery output is predicted to triple from 2018-2025. These challenges
need to be overcome for low social, environmental and carbon footprint cost.

The effect on the climate due to increased burning of fossil fuels has become noticeable on the
planet.

Effect from burning of fossil fuels on environment and climate (Courtesy: Shutterstock)

1.3.2 Consumption of energy by source (renewable and non-renewable)

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PEE 201 Introduction to Petroleum Engineering Dr. Ajay Suri

It is predicted that the percent share of the renewable energy sources may be close to 30%
from the current 15% by 2050. Some sources predict that it may even reach 50%.

1.3.3 Consumption of energy by sector (residential, industrial, commercial and

transportation)

1.3.4 Organisation for Economic Co-operation and Development

The Organisation for Economic Co-operation and Development (OECD) is an international

organisation that works to build better policies for better lives. There are currently 37
countries, mostly developed are its member.

The OECD countries will not have much change in their energy consumption based on the
sectors. However the non-OECD countries which include China and India, will see increase in
the energy usage in all of the sectors. The ratio between the usage may not change
significantly.

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PEE 201 Introduction to Petroleum Engineering Dr. Ajay Suri

1.3.5 World Electricity Consumption

The current electricity usage of the world is around 15 trillion KW in non-OECD countries
and 10 trillion KW in OECD countries. It is projected that by 2050 the non-OECD countries
will require 30 trillion KW (around twice of current) while OECD will require around 15
trillion KW (around 1.5 times of current).

In terms of sector the electricity demand will increase in all of them. The major rise will be in
residential sector. It will increase from around 20 quad BTU to 50 quad BTU.

Looking back at the major crude oil applications:

1. Energy
2. Chemical products
3. Industrial (processing of minerals and metals to production of chemicals and machinery to
production of paper, food and textile)
4. Agriculture
5. Shipping
6. Personal and Business travels
1.3.6 Crude Oil Application in Transportation Sector

The sector of transportation has seen a tremendous growth in the demand especially in the past
40 years. From 1973 to 2012, the sector increased its oil consumption from 1022 to 2326
million tons of oil equivalent (mtoe) on an annual basis, i.e. the demand has become more than
double.
Note the transportation sector includes:

1. Aviation (mechanical flight)

2. Marine navigation (ships)
3. Road (good and personnel movement)

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4. Railroad (goods and passengers movement)

5. Pipeline (liquid or gas movement)
The industrial sector includes:

1. Processing of minerals and metals

2. Production of chemicals
3. Production of machinery
4. Production of paper, food and textile
The example of non-energy use of petroleum is in providing the raw material for making other
products such as plastics etc.

If we look at the distribution of petroleum demand in the OECD countries, we see more than
50% of petroleum is consumed on road, with aviation consuming around 8%, residential,
commercial and agricultural sector consuming around 9% and petrochemicals around 14%.

The non-OECD countries most likely would have even more consumption % of petroleum in
the transportation sector (possibly around 70% which includes road, aviation, rail and
domestic water-ways).

The charts below show the significance of shift of role of transportation to crude oil markets.
Data is from International Energy Agency’s Key World Energy Statistics 2014.

Oil demand has increased annually 33.4 mtoe between 1973 and 2012. This is due to increased
use of transport vehicles such as passenger cars and airplanes. The oil consumption in industry

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has dropped from 448 mote to 310 mtoe during the same period, i.e. by 3.5 mtoe on an annual
basis (possibly due to higher energy efficiencies and/or lower usage).
From about 45% in 1973, the transportation share has increased to around 64%.

The seasons also affect the demand and economics of petroleum. The majority of world’s
population lives in the northern hemisphere, so when there is summer for them, the gasoline

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PEE 201 Introduction to Petroleum Engineering Dr. Ajay Suri

demand increases. While during their winter time the diesel demand increases because it is
often used for heating.
Oil is partly replaced by coal in industry and power generation. The share of industry in
world’s total coal consumption is around 80%, up from 56.6% in 1973. The rise of coal,
natural gas and nuclear in power generation is one of the reasons behind the relative decline of
oil for industrial use.

The world has become more mobile and connected. The U.S. had been the consuming 40% of
gasoline of the world in the past. From 1975 to 2012, road vehicles increased from 137.9
million to 253.6 million (25.36 crores). These are passenger cars, light duty vehicles, trucks,
motorcycles and buses.

The future of transport sector as predicted by U.S. EIA energy outlook 2016 is that the OECD
countries will consume roughly the same 60 quad BTU until 2040 but the non-OECD will
have their share increased from 40 quad BTU to 100 quad BTU in their transportation sector.
The major fractions will be gasoline and diesel and the total energy consumption from
petroleum and natural gas would increase from 100 quad BTU to 160 quad BTU.

https://www.eia.gov/outlooks/ieo/pdf/transportation.pdf

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The figure below shows the growth in transportation energy consumption in the two groups

India is predicted to have the largest average annual growth (4.4% per year) in transportation
energy consumption. In terms of modes of transportation (passenger and freight), both modes
are expected to have increased energy consumption. Light weight vehicles in the passenger
mode while trucks in the freight mode will be the the major consumers.

The transportation energy consumption by the OECD countries will be negative by 2040.
Only the air mode will see a higher energy consumption in OECD countries. In non-OECD
countries, all passenger modes will be see increase energy consumption.

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The figure below compares the passenger vs. freight modes energy consumption. Passenger
mode consumes more than the freight mode. Within the passenger mode, the light-duty
vehicles consume the most.

India consumes only 3% of world’s energy consumption out of the total consumption in the
transportation sector. This ratio will keep going up for India due to its population ratio in the
world which is around 18%.

The % usage of petroleum in the different areas as predicted by IEA is shown below. We can
clearly see passenger vehicles to continue to take up around 25% of the total petroleum usage
share. The petrochemical feedstock share is expected to increase from 10% to 16% by 2040.

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1.4 Global petroleum production and consumption (from textbook)

The global production/consumption of petroleum is around 100 million U.S. barrels of oil per
day. 1 U.S. barrel is equal to 5.615 cubic ft or 158.97 liters.
The leading petroleum producing nations are:
1. United States
2. Saudi Arabia
3. Russia
4. Canada
5. China
The figure below shows the production from these 5 top producers until 2014.

Top 5 producers as of 2014 (from Fanchi et al., original source: EIA)

These top five countries produce around 35% of the total world’s production.
The world’s top 5 consuming nations are:
1. United states
2. China
3. India
4. Japan
5. Russia
The figure below shows their consumption of petroleum per day:

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Top 5 consuming nations as of 2014 (from Fanchi et al., original source: EIA)

The top 5 natural gas producing nations are:

1. USA
2. Russia
3. Qatar
4. Iran
5. Canada
The total natural gas production of the world is around 125 trillion cubic feet per year. USA
and Russia are leaders in natural gas production. Production of natural gas from shale and
tight sandstones has helped US to increase its production drastically. USA is expected to
replace many of its coal-fired power plants with cleaner burning natural gas.

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Top 5 natural gas producing nations as of 2014. (Fanchi et al., original source: EIA)

The top 5 natural gas consuming nations are: 1) USA, 2) Russia, 3) China, 4) Iran, 5) Japan

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1.5 Petroleum Resource and Reserve Definitions

A petroleum resource is the total petroleum in place. They can be classified as conventional
(generally produced) or unconventional (not generally produced). Conventional resources can
be produced economically using the available technologies and that’s the reason they are
generally produced. The unconventional resources are both technically and economically
difficult to produce and that’s why they are not generally produced. We will discuss petroleum
resources in some detail after we define what reserves are.

A reserve is the amount of the resource that we can be extracted with some precise definition
about its feasibility. These are further classified as proven (90% probability of finding and
extracting), probable (50% probability), and possible 10% probability) reserves. If the reserves
are normally distributed, the proven, P90 = P50 or mean – 1.28 standard deviation, probable
P50 is the mean, and possible, P10 = P50 or mean + 1.28 standard deviation. Society of
Petroleum Engineers – Petroleum Reservoir Management System maintains the detailed
definitions of these classification and can be found in the textbook. There are resources that
are difficult to extract both technically and economically, for ex. petroleum from tight
sandstones, shales, oil sands, natural gas hydrates etc.

1.6 World’s Oil and Gas Resources

The conventional petroleum resources are crude oil, condensate and natural gas found in rocks
that are concentrated, easily accessible, and are in rocks with medium to high productivity
potential. The precise definition may vary. These resources can be extracted with the available
technology economically.

The unconventional resources are the ones that are not concentrated, not easily accessible, and
are in rocks with low productivity potential. These are normal petroleum in very tight
sandstones/carbonates/ shales, natural gas in hydrates under the sea bed or permafrost regions,
natural gas in coal seams, oil sands, very heavy oil etc. The figure below shows different types
of resources that are conventional and unconventional.

Large oil and gas fields typically contains from 500 million to 5 million barrels of recoverable
oil. Oil fields with more than 5 billion barrels are supergiant. A large/giant gas field contains
3-30 Tcf, while supergiant gas fields contain 30 Tcf of recoverable gas.

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1.6.1 Coal Gas/ Coal bed Methane/ Coal seam gas

Natural gas found and recovered from coal seams in known as coal gas or historically coal bed
methane, since it is mostly methane (with some amounts of ethane, CO2, N2 and H2). It
typically does not have H2S, hence is also termed sweet. Some of it is adsorbed on the surface
of the coal matrix and some of it is free gas in the coal fractures called cleats. Typically water
is produced before the gas is released from the coal matrix into the fractures and then to the
well. The amount per ton of coal ranges from 20 scf to 600 scf.

Originally the gas from removed from the coal seams to improve the coal miner safety. But
today has become an important source of commercial fuel.

1.6.2 Gas Hydrates

Natural gas can be entrapped into solid cages of water molecules similar to ice but different at
high pressures (ex. 100 atm) and relatively low temperatures typically less than 30 oC. 1 mole
of natural gas is typically trapped in 6 moles of water. These pressures and temperatures are
found under the ocean and sea beds and in the permafrost regions of the planet.

Historically, they have caused problems during drilling under the ocean floors or permafrost
regions and during flow of natural gas and water in pipelines and well tubing. The formation
of hydrates in the pipe can block the flow, resulting in economic loss and can lead to pressure
rise and even burst of pipe. The solid formation is typically inhibited by added methanol,
glycols or specially made chemical inhibitors.

Due to their large presence all over the world (about 100’s of quadrillion cubic ft), they have
been recognized as potential clean energy source. However the average % of gas hydrate in
the pore volume is only around 4%. 99% of gas hydrates are in marine sands in the continental
margins and 1% is below about 600 ft in permafrost regions. Economics and safety is a major
concern in producing from this resource.

1.6.3 Tight Gas Sands, Shale Gas and Shale Oil

These are petroleum resources with very low production potential due to rock permeability.
Rock permeability is the ability of the rock to allow fluid flow. The permeability of tight gas
sand is of the order of microdarcies (1 d to 1 millidarcy). Darcy is a unit of permeability. It
will be explained later in detail in the reservoir rock chapter. For now remember 100
millidarcy is a reasonable permeability of a rock for fluid flow. Shale has permeability on the
order of nanodarcy (1 nD to Ds).

Economic production from these tight sands and shale have become possible with drilling
directional wells and hydraulically fracturing multiple places to increase the contact area.
Regions with similar shale, known as shale plays in the US is shown below. The first major
breakthrough happened in Barnett Shale in 1990’s where high gas rates were achieved after
successful hydraulic fracturing using high water rates. Marcellus shale in Pennsylvania,
Bakken in North Dakota and Eagle Ford shale in South Texas are some of the other major
shale plays that are producing and will be producing for many decades.
The table below summarizes the estimates of technically recoverable reserves from coal, tight
sand and shale by Holditch (2013) and McGlade et al. (2013). There is a huge uncertainty in
these estimates as indicated by the variation in their numbers.

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Shale plays in the contiguous United States (EIA 2015)

1.6.4 Tar Sands

Sand grains cemented together by tar or asphalt are known as tar sands. Tar and asphalt are
highly viscous plastic or solid hydrocarbons. An example is Rocky mountain region of North
America that has extensive tar sand deposits.

The petroleum or hydrocarbons in tar sands are extracted by mining when the tar is close to
the surface. In deeper regions the mobility of tar is increased by heating it via steam or hot
water injection.

1.7 Global distribution of Oil and Gas Reserves

Table below lists the top 15 countries with the largest proven oil reserves and largest proven
gas reserves. The total world proven oil reserves are around 1.7 trillion bbls. With the current
rate of consumption, they can last for about 50 years. The largest crude oil proven reserves are
in Venezuela, Saudi Arabia and Canada. Amongst these Venezuela has a lot of heavy oil while
Canada has a lot of tar sands. World’s proven natural gas reserves are around 7 quadrillion
cubic ft and with the current rate of gas consumption of 125 tcf/yr. it would take around 60
years to finish these reserves. The largest proven gas reserves are in Russia, Iran and Qatar.

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The table below shows the regional distribution of proven crude oil and natural gas reserves.
We see that middle-east has around 50% of the oil and 40% of the gas. Europe has the
minimum and so they are trying to develop renewable energy sources such as wind farms and
solar plants. France has relied primarily on nuclear fission for its electricity. It also supplies
electricity to other European nations.

The reserves are continually added from the resources as we develop them. Figure below
shows how these reserves have been increasing every year since 2000. The oil reserves have
increased from 1 to 1.7 Trillion reserves in 15 years while gas proven reserves have increased
from 5 quad to 7 quadrillion cubic ft.

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World proven reserves from 2000 to 2014 (EIA 2015)

1.8 Peak Oil

Since petroleum is a fossil fuel, it is supposed to end sooner or later. M. King Hubbert studied
oil production in the US and made prediction about the future. The annual production in the
US continued to increase until a maximum and then started to decline as it became difficult to
find and produce. The maximum oil production was considered as a peak. Hubbert had
predicted the peak in the US to occur between 1965 and 1970. He also predicted the peak for
the world to occur around 2000 with the peak production rate of about 35 million bpd. This
did not turn out correct since the world is producing around 90-100 million bpd.

The first peak in the US did occur in 1970 with peak production rate of 9.4 million bpd.
However a second peak occurred in 1988 when Alaskan production peaked at 2 million bpd.
Note Hubbert’s model was limited to only contiguous US and did not account for Alaska.
Forecasts based on historical data is prepared by many experts. Figure below shows some of
these models with maxima’s / peaks.

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US EIA database has historical fits with 3 predictive models. Gaussian fit 2000 matches peak
data at 2000. Gaussian fit 2008 matches peak data at 2008 and Gaussian fit 2014 matches peak
data at 2014. Each fit was designed to match the most recent part of the production curve more
accurately. The fits give peak oil between 2010 and 2030 as shown.

The increase in production after 2000 is due to increased demand and due to shale oil
revolution in the US. The world peak predictions are inconclusive as of now.

If world per capita oil production rate, i.e. yearly oil production divided by population is
considered, we see both have an increase in the figure below although the correlation is not
perfect.

World oil production per person and world population since 1960

1.9 Future Energy Options and Transition

The future energy demand is expected to grow substantially as indicated by EIA outlook
mainly due to the world population increase and due to the non-OECD countries development.
Nuclear fusion is still a hope that it could become a possible energy source. If it does, it would
be great but until then we will continue to rely on the fossil fuels, nuclear fission and
renewable energy sources.

Environmental concerns, political instability in the middle-east and decrease in the renewable
energy costs are pushing out from fossil fuels based society. However the natural gas based
fossil fuels that includes the unconventional resources is encouraged due to its cleaner burning
and availability.

It is difficult to determine the rate of transition from fossil fuels to renewable energy sources
or for that matter from any one energy source to another. Fanchi (2015) introduced a
Goldilocks policy for determining this rate. The US is a developed nation with a history of
energy transitions over the past few centuries. Figure below shows the historical energy
consumption data of the USA from US EIA annual energy reviews (2001). The next figure
shows the % energy consumption in the USA by the different sources.

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Wood was the primary source when US was founded in the 18th century. Coal took over the
energy market in the 19th century and peaked in the early 20 th century. Oil competed with coal
in the latter half of the 19th century and became the largest source by the middle of the 20th
century.

USA energy consumption from various sources since 1650 until 2010 (EIA, 2001)

US energy consumption from various sources in %. Coal and oil transition periods (Fanchi
2015)

For most of the energy sources (wood, coal, oil, natural gas, hydro), we can see from their
appearance to their peak consumption in %. The peak of nuclear and other renewables hasn’t
reached. Looking the major energy sources, coal and oil, we see the transition from coal to oil
took around 60-70 years.

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The future energy mix will depend on the choices we make, i.e. on the energy policies. Lot of
factors such as energy capacity, cost, safety, reliability and effect on environment are
considered in making these policies. The capacity should meet the needs or the demand and
should be available when needed (reliable).

The transition from wood to coal and from coal to oil has been understood as a trend toward
decarbonisation or the reduction in the relative amount of carbon in fuels. However there is
debate between wood and coal carbon foot print for the same amount of energy output.

US fraction of energy consumption due to fossil fuels (coal, oil and natural gas), nuclear and
renewables (hydro, wind, and solar) is plotted below since 1950.

Fraction of US energy consumption by source since 1950. (EIA, 2015)

Moving towards natural gas is US’s next step towards decarbonisation. Natural gas has a
lower CO2 to energy content compared to the other fossil fuels.

There are two competing ideas on the transition rate. One idea is that the rate should be as fast
as possible due to climate effect while the other idea is that the rate could be gradual and that
there is no urgent need. The second idea has arguments that economic health will suffer if the
first idea is adopted.

The “Goldilocks Policy for Energy Transition” is designed to establish a middle ground
between these competing ideas/visions. Based on the historical data, it plans a reasonable
energy transition rate so as to have a sustainable energy mix by the middle of the 21st century.
The European Union is operating the time table. Natural gas is perceived to serve as a
transition fuel because of its abundance, lower greenhouse gas emission relative to oil and coal
and requires affordable infrastructure changes that take advantage of available technology. A
natural gas infrastructure would be a step toward a hydrogen economy infrastructure in the
event that hydrogen becomes a viable energy carrier. Commercial nuclear fusion would be a
game changer and can substantially accelerate the transition to sustainable energy mix.

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Technological advances will determine the energy mix in the 21 st century. However oil and
gas will continue to be a key source of energy in the global energy mix as society makes a
transition to a sustainable energy mix.

1.10 Activity (True/False)

1. Gas hydrates are clathrates which are structures in which water molecules bond to form
complex cage-like structures that encapsulate a guest molecule, which is a gas.
2. Shale gas is produced from high permeability reservoirs
3. Coal gas production requires gas desorption from the coal matrix
4. Coal gas is primarily propane
5. The first U.S. oil crisis began in 1973.
6. M. King Hubbert predicted that global oil production would peak between 1965 and 1970.
7. Per capita global oil production peaked by 1980
8. Resource is typically more than reserve.
9. Shale oil and gas are unconventional resources
10. Probable reserves are more likely to be recovered than possible reserves.

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PEE 201 Introduction to Petroleum Engineering Dr. Ajay Suri

Introduction to Petroleum Engineering

We have set the stage or context for studying petroleum engineering, i.e. we have learnt that
petroleum will play a key role in this century until the transition to other renewable energy
source takes place. Moreover, today, the global economy is based on the infrastructure that
depends on the consumption of petroleum (Fanchi, 2016).

To review, petroleum is a mixture of hydrocarbons and inorganic impurities in solid, liquid or

gas phase. To produce petroleum, typically projects are designed, implemented and executed.
The project workflow identifies the opportunities, evaluates alternatives, selects and operates
the desired alternatives over the life of the project including abandonment. The success and
lessons learnt is evaluated for the future projects. Peoples with skills with many disciplines are
involved. For ex. geologists and geophysicists describes the reservoir rock. Petroleum
engineers extract petroleum. Some companies form asset management teams for implementing
these project.

Figure below illustrates a very simple offshore production system. A particular strata in the
subsurface typically known as a petroleum reservoir holds oil, gas and water in its pore spaces.
Wells are drilled and completed such that petroleum can flow from the reservoir to the
surface. The performance of the well depends primarily on the reservoir rock permeability,
and fluid viscosity etc. The well contact area with the reservoir is also very important.

Petroleum production system (Fanchi, 2017)

In order to drill the well, equipment at the surface known as drilling rigs are used. These could
be permanently installed or could be portable. These mobile rigs use vehicles like trucks,
barges, ships or mobile platforms.

The produced fluids are separated into oil, gas and water using gravity segregation. The fluids
collected as oil and gas are further treated and are then stored. The treated oil and gas is
transported using either pipelines, tankers, or liquefied natural gas ships.
The hydrocarbons are further processed into marketable products at the refineries or
petrochemical plants. Natural gas is typically used for utilities, gasoline and diesel as fuel for
transportation and asphalt for paving.

Petroleum engineers may work in desert climates in middle-east, stormy offshore weather of
North Sea, arctic climates of Alaska and Siberia, deepwater environments of Gulf of Mexico,
and off the coast of West Africa. They tend to specialize in one of the 3 sub disciplines:
drilling engineering, reservoir engineering and production engineering. Drilling engineers are

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responsible for drilling and completing the wells. Reservoir engineers optimize hydrocarbon
production using the understanding of fluid flow in the reservoir, effect of well placement,
well rates and recovery techniques. Production engineers seek to optimize and manage fluid
flow between the reservoir and the well and also manage the surface facilities. The society of
petroleum engineers (SPE) is the largest professional socity for petroleum engineers. A key
function of the society is to disseminate information about the industry.

Other Opportunities for Petroleum Engineers

Petroleum engineering principles are also applied to geothermal energy (hot water below
surface), geologic sequestration of greenhouse gases such as CO 2, compressed air energy
storage (CAES, stores heat in the compressed air during low demand and make it available
through expansion during high demand), ground water hydrologists etc.

1.11 Oil and Gas Units

Two sets of units are common in petroleum literature: U.S. oil field units and metric units (SI).
The ability to convert between them is an essential skill required by a petroleum engineer.
Sometimes British units are also used. The table below shows the units.

Some of the commonly used units with their conversion factors are given below. For a
complete list, refer the Appendix of the book.

1 acre = 4047 m2 = 43560 ft2

1 hectare = 104 m2
1 md = 0.986923 x 10-15 m2
1 U.S. bbl = 42 U.S. gallons = 0.15897 m3 = 158.97 liters = 5.6148 ft3
1 U.S. gallon = 3.788 liters
1 lbm = 0.453592 kg
1 pound-force = 1 lbf = 4.4482 N
1lbf/in2 = 1 psi = 6894.8 Pa
1 bar = 0.1 MPa = 14.5 psi
1 atm = 1.01325 x 105 Pa
1 cp = 0.001 Pa.s
1 horsepower = 1 hp = 745.7 W = 33000 ft-lbf/min
1 BTU = 1055 J (amount of energy required to heat 1 lb of water by 1oF)
1 kW-h = 3.6 x 106 J
1 barrel of oil equivalent = 1 BOE = 5.8 x 106 BTU = 6.12 x 109 J
(oF) = 1.8 x (oC) + 32
(oR) = (oF) + 460 = 1.8 x (oK)

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PEE 201 Introduction to Petroleum Engineering Dr. Ajay Suri

1.12 Fluid Production Ratios

The ratio of volume of one fluid produced to another fluid provides understanding of the
behaviour of the reservoir. Typically qo, qw, and qg are used as the volumetric production rates
of oil, water and gas. The following produced fluid ratios are typically used in describing the
production.

Gas-oil ratio (GOR) = qg/qo

Gas-water ratio (GWR) = qg/qw

Water-oil ratio (WOR) = qw/qo

Water-cut (WCT) = qw / (qo + qw)

Except water-cut all can be any positive number. WCT is a fraction that can only vary
between 0 and 1. GOR indicates reservoir fluid type. Its unit is thousands of standard cubic ft
per stock tank barrel of oil at standard conditions (MSCFG/STBO). Standard or standard
conditions here means the volume of gas and oil at 14.7 psi (1 atm) and 60 oF. Stock tank is
the tank used to store produced oil.

Oil and gas in the reservoir are at higher subsurface temperatures and pressures. Typically the
gas is dissolved in the oil forming single phase, however as they are produced the pressure
reduces resulting in gas bubbling out. The reservoir oil and gas types are categorized based on
the GOR and their density (which is related to GOR). Instead of density, or specific gravity,
API (American Petroleum Institute) gravity is used in the petroleum literature.

141.5
API= −131.5
γo

o is the specific gravity of oil which is equal to the density of oil divided by density of water
at standard conditions. 10 API means that the specific gravity of oil is equal to 1, i.e. the
density of oil is equal to the density of water.

The general rule of thumb for classifying the oil and gas types are shown below.

Another way to classify the oil is using the API gravity and viscosity as shown below.

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Light, medium and heavy oil are less dense than water. However medium and heavy oil may
have viscosities more than 1 cp (viscosity of water). Extra heavy oil and bitumen are
heavier/denser and much more viscous than water. These will sink in water.

1.13 Life Cycle of a Reservoir

The life of a reservoir starts from exploration and ends when abandoned. A prospective
rservoir is a geological structure that may contain hydrocarbons due to its storage and
production capacity and due to its likelihood to have the petroleum trapped. Exploration stage
begins when the prospect is further assessed. The assessment is done via acquisition and
analysis of data via drilling of exploration wells. These wells were also called wildcats. They
may test a new structural trap, a new reservoir in a known field or find boundaries/limits of a
producing reservoir.

Discovery is said when an exploration well encounters hydrocarbons. Figure below illustrates
a typical production profile of an oil field beginning from the discovery to its abandonment.

After appraisal wells that provide information about the reservoir fluid types, production
capabilities etc. delineation wells for delineating the reservoir/field boundaries could also be
drilled before actually putting the field on commercial production. These wells can be then
used as development wells to optimize the petroleum resource recovery. After the first
commercial oil, production buildup takes places which plateaus typically due to surface
facility limitations such as pipeline capacity. Eventually production declines and reaches an
economic limit when the field is abandoned.

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PEE 201 Introduction to Petroleum Engineering Dr. Ajay Suri

Petroleum engineers optimize field production as per the managers and govt. regulations.
Changes in optimization may occur due to changes in technology, economic factors, and
analysis of new data coming in.

Traditionally production stages after first oil were chronological, i.e. with primary, secondary
and tertiary stages as shown in the figure below. Primary production was due to reservoir fluid
natural pressure energy that drives fluids to the well. When this energy depletes, it is known as
primary depletion. This depletion is overcome typically by injecting water or gas which
maintains the reservoir pressure. This typically used to be done at a later stage and hence was
known as secondary production or recovery. However today, most reservoirs have pressure
maintenance done from the start of production itself. Hence there is no primary production
phase.

The plateau shown in the previous figure may not occur due to facilities limitation and instead
may have peaks as shown in the figure below.

Traditional petroleum production stages

Water injection serves two purposes, it displaces oil and it replenishes the pressure energy. It
is often known as water-flooding and it is done in oil reservoirs. Sometimes reservoirs are in
contact with water-bearing formations known as aquifers. If an aquifer is large and water is
able to flow into the reservoir with ease, reservoir pressure is replenished to some extent. All
the natural forces involved in primary production are known as reservoir drives and will be
discussed in a later unit. In gas flooding, the gases used can be methane, carbon-dioxide,
nitrogen etc. Gas flooding is considered secondary production if the gas injection pressures is
lower than the miscibility pressure for the oil. If the injected gas becomes miscible with the
oil, then it is one of the tertiary/enhanced oil recovery (EOR) processes which are applied
typically beyond the secondary recovery.

EOR processes include miscible, chemical, thermal and microbial processes. Chemical
processes injected chemicals such as polymers and surfactants to increase oil recovery.
Thermal processes add heat to the reservoir through injection of hot water, steam or oxygen-
containing air which is combusted. Microbial processes use microbes which break down the
size of the high molecular weight hydrocarbons and improve oil mobility.

Lab experiments and field applications have shown that some fields perform better if the EOR
process is implemented before the third production stage. EOR processes are often expensive
and typically more expensive than drilling wells in a denser pattern known as infill drilling.
The term improve oil recovery (IOR) includes EOR and infill drilling. These processes can
also accelerate the production rate.

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1.14 Reservoir Management

Reservoir management goal is to determine the optimum operating conditions that would
maximize the economic recovery of petroleum. The capital investments and the operating
expenses have to be also minimized per unit barrel produced but at the same time the total
number of barrels produced have to be maximized. For example we could increase the
production rate by drilling more wells, but the cost of drilling per unit of barrel produced goes
up. We may minimized the cost to produce if we drill only one well but then the time to
produce the total number of barrels may be unreasonably high and the net present value of
those barrels produced in the future may be actually quite low.

Reservoir management/optimization is done continuously as more production data comes in

and as economic conditions change. There are however uncertainties in reservoir
characterization that determines the production forecasts.

1.15 Recovery Efficiency

The volume of petroleum produced or recovered to the volume originally in place is the
recovery efficiency. It is a fraction but can be expressed as a %. It is typically affected by the
displacement efficiency, ED and the volumetric efficiency, EVol. Displacement efficiency is a
measure of the reservoir fluid that can be displaced or mobilized by a displacement process.
For ex. water displacing oil in a core. It is equal to the oil produced from the core divided by
the initial amount of oil in the core. E Vol expresses the sweep efficiency in the reservoir, i.e.
how much volume of oil was swept or contacted divided by the total reservoir volume.

Recovery Efficiency=ED E Vol=E D E A E V

Volumetric sweep efficiency can be further divided into areal, E A, and vertical, EV, sweep
efficiencies. Areal efficiency would be equal to the swept area divided by the total reservoir
area while the vertical sweep efficiency would be equal to the swept thickness of the reservoir
divided by the total thickness of the reservoir.

1.16 Petroleum Economics

As mentioned before the reservoir management was done to minimize the cost per bbl, while
maximizing the number of bbls produced. One way to do this is through cash flow with time
analysis. Cash flow in time depend on the predicted produced volumes and produced fluid
prices. The cash flow with time analysis is done for different reservoir development /
production scenarios and the scenario with the highest economic value is chosen.
Net present value (NPV) is typically used to evaluate the cash flow in time. It is the difference
between the present value of Revenue, R and the present value of expenses, E.
Future money/cash is discounted at a certain rate, r (also known as time value of money,
which typically goes down). Using a discounted rate, the cash flow is known as discounted
cash flow. As a simple example, NPV for an oil and/or gas reservoir may be calculated as
(Fanchi, 2010):

NPV =R−E

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PEE 201 Introduction to Petroleum Engineering Dr. Ajay Suri

N
qoi P oi + qgi Pgi
R=∑
i=1 (1+ r)i
N
CAPEX i +OPEX i +TAX i
E=∑ i
i=1 (1+r )

N is the total number of years of the project, q oi is the oil production rate in year i, P oi is the
price of oil in year i, qgi is the gas production rate in year i, Pgi is the gas price in year i, r is the
discounted rate (a fraction), CAPEX is the capital expenditure, OPEX is the operating
expenditure, and TAX is the tax.

The discount rate at which the NPV is zero is known as the discounted cash flow return on
investment (DCFROI) or internal rate of return (IRR). This parameter could also be used for
comparison instead of comparing the NPV. A higher IRR means a more economically
promising project.

The real NPV calculations for a project may be more complicated with some more terms like
royality, the actual discount rates may also change with future years. A typical NPV plot with
time is shown below. Until N = 2 to 3 years, the project has a negative NPV. This is due to
initial capital investments, CAPEX, and OPEX with no oil/gas production (revenue). With
time, there is an increasing R while decreasing CAPEX. The point at which NPV crosses from
negative to positive is known as the discounted payout time. In the figure below it is around
2.45 years.

Typical cash flow in a petroleum project

Table below summarizes the commonly used economic terms.

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PEE 201 Introduction to Petroleum Engineering Dr. Ajay Suri

DCFROI or IRR and discounted payout time are measures of economic viability of a project.
Profit-to-investment ratio (PI) is also used as a measure for profitability from a project. PI
does not take into account the time value of money. A plot of NPV at different discount rates
is also sometimes useful.

The uncertainty in NPV calculations due to:

1. Production volume forecast
2. Price forecast
3. Geopolitical events
Could be accounted by taking a range for these values.

1.17 The Price of Oil

The price of oil is influenced by geopolitical events such as the Arab-Israeli war triggered the
first oil crisis in 1973 which increased the oil price from $3/bbl to $12/bbl, a four times
increase. This increase in the oil price was mostly due to the Arab nations oil-embargo on the
nations supporting Israel. Americans were rationing gasoline with customers lining up at the
petrol stations. The world started to think to shift away from a carbon-based economy.
However despite the concerns and subsequent oil crisis, the world still depends on fossil fuels
for energy (80%).

The price of oil has peaked whenever a geopolitical event threatens or disrupts the supply of
oil. However its price will be limited as discussed next.

1.17.1 How does Oil Price Affect Oil Recovery

Table below shows the cost/price for oil recovery for different petroleum resources and
recovery technologies and for alternative energy sources.

Since the maximum cost is around 2016 $101-152/bbl for the alternative energy sources, the
price of oil cannot go much higher than that. If the price of oil is kept any higher than this,

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PEE 201 Introduction to Petroleum Engineering Dr. Ajay Suri

consumers will begin to switch to alternative energy sources. The price is oil is different in
different countries. The countries which have higher prices are trying to develop alternative
energy sources, for ex. Denmark, Germany, Holland are rapidly developing wind energy.

Oil exporting countries try to maximize their income and minimize competition from
alternative energy and expensive oil recovery techniques by supplying just enough oil to keep
the price below the price needed to justify energy transition. Saudi Arabia increases the supply
of oil to reduce the price of oil. This creates problem for others trying to develop EOR or extra
heavy oil or unconventional oil such from shale.
1.18 Petroleum and the Environment

Oil pollutes life and things if spilled on land or at sea. However oil as energy has saved us
from deforestation (wood use for energy) and extinction of whales (whale oil was used prior to
crude oil use as illuminant in the late 19th century).

1.18.1 Anthropogenic Climate Change (Environmental Changes from Human Activities)

CO2, CO, and various nitrogen oxides, abbreviated as NOx, water vapor are some of the major
by-products of burning of fossil fuels. These by-products including some leaked natural gas in
the environment absorbs infrared light from the sun and gains molecular kinetic energy as
heat. The associated increase in atmospheric temperature is known as the greenhouse effect as
illustrated below. Much of the sun’s light energy does not pass through the atmosphere to the
surface of the Earth. A study of light arriving at surface shows that certain frequencies of light
energy are absorbed in the atmosphere.

Charles David Keeling has been measuring CO 2 concentrations (one of the greenhouse gases)
at Mauna Loa Observatory in Hawaii since 1958. Continuous rise from 315 ppm to about 400
ppm has been observed since then. His plot with time is known as the keeling curve which is
also shown below. The curve also exhibits an annual cycle.

Samples of air bubbles in ice extracted from glaciers in Vostok, Antarctica have been used to
measure the concentration of gases in the past. The measurements showed that CO 2
concentrations varied between 150 and 300 pm in the past 400,000 years. However, in the past
2 centuries, CO2 concentrations increased from 300 ppm and are continuing to increase.

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The greenhouse effect, Fanchi (2004)

The Keeling curve (Fanchi, 2017)

Wigley et al. (1996) argued that CO2 concentration should remain beneath 550 ppm taking
into the effect of greenhouse effect on global warming and melting glaciers. However some
scientists argue that higher concentrations can facilitate plant growth.

1.18.2 Environmental Issues

Society has imposed penalties on operators for behaviour that could harm or have harmed the
environment. For ex. Shell UK had an agreement with British government in 1995 to dispose
an oil storage platform called the Brent Spar in the deep waters in the Atlantic. An
environmental protection group Greenpeace and its allies were concerned that oil left in the
platform would leak into the Atlantic. Greenpeace challenged Shell UK and occupied the
platform. Shell UK abandoned the plan to sink the Brent Spar and used it as a ferry quay
(platform for loading or unloading ships). As a result, governments throughout Europe
changed their rules regulating disposal of offshore facilities.

Another recent concerns regarding microseismic events due to hydraulic fracturing of shales
and due to water disposal has led to close regulations and even bans of this technique in some
states in the US.

Oil spills in marine environments require extensive cleanup. The 1989 Exxon Valdez oil
tanker in Alaska and 2010 explosion and sinking of the BP Deepwater Horizon offshore
platform in the Gulf of Mexico are two examples out of many. Both led to significant financial
penalties and remediation costs. In the case of BP Deepwater Horizon incident 11 people lost
their lives. The Exxon Valdez spill motivated the use of double-hulled tankers.

1.19 Activity (True/False)

1. A hydrocarbon reservoir must be able to trap and retain fluids.

2. API gravity is the weight of a hydrocarbon mixture.
3. Separator GOR is the ratio of gas rate to oil rate.
4. The first stage in the life of an oil or gas reservoir is exploration.

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PEE 201 Introduction to Petroleum Engineering Dr. Ajay Suri

5. Volumetric sweep efficiency is the product of areal sweep efficiency and displacement
efficiency.
6. Net present value is usually negative at the beginning of a project.
7. DCFROI is discounted cash flow return on interest.
8. Nitrogen is a greenhouse gas.
9. Water flooding is an EOR process.
10. Geological sequestration of carbon dioxide in an aquifer is an EOR process.

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