The petroleum industry encompasses the exploration, extraction, refinement, transportation, and marketing of petroleum commodities. Petroleum commodities include bitumen and various types of crude oil such as natural gas and natural gas liquids (ethane, propane, and butane). Raw oil is extracted from the ground from a drilled oil well, refined and converted into natural gas heating and more than 300 other products such as gasoline, diesel, jet fuel, kerosene, plastics, and fertilizers.^[1]

Operations in the petroleum industry are divided into two primary sectors: upstream and downstream. Upstream operations take place out in the field and involve the exploration and production of oil. Downstream operations are concerned with the commercial and retail side of the business and include oil refineries, gas processing plants, petrochemical plants, gas stations, and natural gas distribution companies. Midstream is a term used to distinguish the sector encompassing oil storage and transport operations. For example, in Canada, transmission pipeline companies, oil sands upgrading, and oil and gas storage facilities all exist as a part of the midstream sector.

As with most commodity-based industries, the petroleum industry is known as a boom-or-bust industry. Not only does it demand a greater degree of financial risk, it is also capital intensive, meaning it requires a higher proportion of equipment and machinery relative to the labor force.

Contents 1 Canada’s Petroleum Industry 2 History 2.1 Early Developments in the U.S. Petroleum Industry 2.2 Early Oil Refining 2.3 Early Developments in Canada’s Petroleum Industry 3 Process 3.1 Exploration 3.2 Site Preparation 3.3 Drilling 3.4 Cable Tool Drilling 3.5 Rotary Drilling 3.6 Refining 3.7 Transport 4 Equipment List 5 References

[edit] Canada’s Petroleum Industry

Crude oil and natural gas are found in many regions across Canada with approximately 80 percent of production taking place in Alberta.^[2] In fact, Canada contains the second largest oil reserve in the world next to Saudi Arabia and is also the world’s third largest natural gas producer. According to Industry Canada, as of 2004, there were about 23,000 drilled oil wells in Canada.^[3] Other sources cite that Canada has about 68,000 oil wells.^[4]

Since 70 percent of oil wells in Canada are found and located on Crown land; both provincial and federal governments have a vested interest in the oil business. The rest of the industry is dominated by a number of vertically integrated companies. These companies tend to be engaged in both upstream and downstream operations. Some of the larger vertically integrated companies are subsidiaries of larger-sized multinational companies based in the United States, the United Kingdom, and the Netherlands. One large player in Canada’s oil industry is Petro-Canada, created in 1975 by Parliament. Petro-Canada is as large in size and scope as other major foreign-controlled oil companies.^[5] While the amount of oil produced in Canada is enough to match the country’s consumption needs, most of the oil produced gets exported to the U.S.

[edit] History

Throughout history, petroleum has had various uses. The Egyptians used a petroleum pitch in the coating of mummies and for sealing up pyramids. Other ancient civilizations such as the Babylonians, Assyrians, and Persians used tar for paving streets, and a petroleum-type mortar for holding walls and buildings together. Petroleum was also used to provide a waterproof coating on the hulls of boats made out of reeds.

The Chinese also discovered petroleum while digging holes for salt water brine and used it for heating. Some of the world’s very first oil wells were drilled in China in 347 C.E.^[6] These early oil wells were dug down to 656 feet (200 m) and used a rudimentary drilling bit attached to a bamboo pole.^[7]

In North America, petroleum was used in paint, fuel, and medicine by Native populations. Pioneers bought petroleum from Native Americans, calling it Seneca oil and Genesee oil. Up until it the 19th century petroleum was even packaged in jars and sold as a miracle tonic or “snake oil” able to cure people of their ailments when drunk. As a product, however, petroleum was in scarce supply and collected only when it bubbled up to the earth's surface or seeped into drinking wells.

Growth of the petroleum industry was relatively slow throughout the 1800s. Early demand for oil was driven by the need for kerosene fuel. The development of the internal combustion engine eventually generated a greater demand for petroleum products. By the early 1900s a number of oil fields were found in Canada, Iran, Mexico, Venezuela, and Peru.

[edit] Early Developments in the U.S. Petroleum Industry

Evidence of a modern petroleum industry in the United States began in 1859 with the drilling of an oil well on Oil Creek in Titusville, Pennsylvania. In 1854, a lawyer named George Biswell, realizing the economic value of petroleum, particularly once converted to kerosene for use in lamps, formed Pennsylvania Rock Oil Co. in 1854. In 1858 he also formed Seneca Oil Co. with business colleagues. The company hired Edwin Drake, an ex-railroad conductor, to drill for oil along a secluded creek, which later became known as Oil Creek. Drake drilled an oil well and discovered petroleum at a depth at 69.5 feet (21 m).^[8] Soon his oil well was producing about 35 barrels of oil a day at $20 each.^[9] He had to scour the entire country to find buyers for his oil, however. The bad smell and black muddy color of naphtha, a highly volatile component of the oil, led to very few sales. The industry soon realized that to make oil suitable for use, it would have to be processed somehow. This gave rise to the concept of refining the oil for a consumer market.

News of Drake's profitable oil well quickly spread, drawing fortune seekers to the region to drill their own oil wells. Soon oil was regarded as the “black gold” of Pennsylvania. Some of these early oil well drillers used Y-shaped divining rods to guide them to a suitable location to drill. Others resorted to using Drake’s method called “creekology”—choosing to drill in close in proximity to the water. Digging the early oil wells involved sticking six-inch (15-cm) cast iron pipes down into the bedrock using a screw type drill to scoop out the dirt and rock from inside the pipes. Once oil was discovered it flowed freely up into the creek until it was able to be capped.

Not only were there complications with drilling oil wells, but transporting the oil also proved to be problematic. In 1865 an oil buyer named Samuel Van Syckel began construction of a two-inch (5-cm) wide pipeline from the Drake's oil well to the railroad depot five miles (8 km) away. To complete the pipeline, Van Syckel had to hire armed guards to watch over construction. By 1865 most of the oil well derricks were dried up, having produced approximately 3.5 barrels a year. Such large-scale production of oil witnessed a huge drop in price to a mere 10 cents a barrel.^[10]

[edit] Early Oil Refining

By 1860 there were about 15 refineries established, known as “tea kettle” stills. These tea kettle stills consisted of very large iron drums with a long tube that served as a condenser. Each still had the capacity to hold one to 100 barrels of oil a day. A coal fire was used to yield three separate fractions from the oil during the distillation process. The foul-smelling and volatile naphtha was boiled off first, followed by kerosene or lamp oil. What remained mostly were heavy oils and tars left in the bottom of the drum. About 75 percent of the oil refined was made into kerosene.^[11] Kerosene became a very valuable commodity because of a shortage of whale oil in 1845 from heavy hunting. Whale oil had been the primary fuel for lighting lamps as well as for making candles. This apparent shortage of a natural oil source led to an increased demand for kerosene. The tar and naphtha fractions boiled off in the refining process held no value and were dumped into Oil Creek. In 1869, a man by the name of Robert Chesebrough discovered how to turn these waste streams into a petroleum jelly called Vaseline. It wasn't long before  heavier components of the oil began to be used as lubricants and waxes in candles and chewing gum. Tar was turned into a material for roofing. Naphtha still held very little value. By 1865 a total of 194 oil refineries were in operation. The development of the gasoline engine brought a surge in demand for petroleum and petroleum products.^[12]

[edit] Early Developments in Canada’s Petroleum Industry

The historical roots of Canada’s petroleum industry started in Western Canada in 1851 when Charles N. Tripp, a businessman, founded the International Mining and Manufacturing Co. to exploit the asphalt beds and oils. It became the first registered oil company in Canada. In 1855 Tripp sold his company to James Miller Williams who discovered that when an oil well was dug to a greater depth, more oil flowed into the hole. His oil well, Williams No.1, produced vast amounts of crude oil, earning Williams the title of Canada’s first oil finder. The well sparked an oil exploration boom in Ontario in the 19th century and eventually another 18 oil refineries were built.^[13] The oil was refined and converted into buggy wheel grease and kerosene lamp fuel and transported either by wagon, railway, barges, or pipeline for sale in retail stores. Eventually scores of drillers, producers, shippers, refiners, and retailers of oil competed in Ontario’s boom or bust market. By 1880 a total of 16 production plants and refineries merged to form Imperial Oil.^[14]

Standard Oil Trust, a New Jersey-based oil company owned by John D. Rockefeller, acquired control of Imperial Oil in 1898 for $350,000.^[15] Imperial Oil remained a subsidiary of Standard Oil until 1911 when the trust was split by American authorities. Standard Oil of New Jersey was later named Exxon. Today Exxon, the world’s largest oil company, still owns 69 percent of Imperial. In 1998 Exxon merged with another oil industry giant, Mobil.^[16]

[edit] Process

[edit] Exploration

The search for potential oil wells is carried out through extensive testing and exploration of a proposed drill site by geologists who are either directly employed by an oil company or work as independent contractors. Most oil exploration companies are small-sized and referred to as “wildcats” by the industry.^[17]

Various methods are used to identify an oil well but many geologists will start out with the most cost-effective method: surveying the site and gathering regional surveys and surface geology reports. Geologists will likely study the surface geology of an area including the rocks, soil types, and surface terrain with the addition of satellite technology. This enables geologists to pinpoint the areas on a map where the oil is most likely to exist. Further extensive testing of these pinpointed areas is conducted using a geological survey—a contoured map of the subsurface area. The geological survey is created using a technique called seismology. Using a seismographic machine, seismology creates shock waves that pass through layers of rock and then interprets the waves as they are reflected back to the surface.

Gravity meters designed to measure small changes in the Earth’s gravitational field are also used to indicate the presence of flowing oil. Another device, called a magnetometer, measures changes in the Earth’s magnetic field to uncover the presence of flowing oil. Geologists also use electronic noses called sniffers that can detect the smell of hydrocarbons, a compound found in petroleum.

Using the geological survey, geologists look for reservoir traps—a unique formation where oil is usually found. There are about five different types of reservoir trap formations and each is made of permeable rock through which oil can flow. 

[edit] Site Preparation

Once a drill site has been determined for an oil well, the site must be prepared. Oil service companies are contracted by drilling companies to assist in setting up the oil well. These companies companies primarily manufacture, repair, and service equipment used in oil extraction and transport. They also provide services such as seismic testing and geological mapping.

The first stage in setting up the drill site is to survey the site to determine its parameters. In addition, an environmental study must be conducted and passed before the site can be prepped. Land titles must be obtained and legally cleared. For off-shore sites, legal jurisdiction needs to be established. Once this is accomplished the site is cleared and leveled and access roads are constructed. Most oil wells must also be within close proximity to a water supply as water is used in the drilling process. If a natural water source is not available a water well gets drilled on-site. A reserve pit is also dug to discard rock cuttings and drilling mud.

[edit] Drilling

Once the drill site is prepared, the drilling of an exploratory oil well can carried out. Oil drilling is a very involved process requiring a certain level of skill and expertise. Drilling starts by setting up a rig on the drill site. The oil well on land. Offshore drilling is the drilling of an oil well can water requiring setting up a semisubmersible rig. Other types of drilling rigs include land rigs, jack-ups, and drillships. From a starter hole, a surface hole is drilled down to a pre-set depth to the reservoir trap housing the oil. Once a preset depth is reached, sections of casing pipe are placed down in to the hole to prevent it from collapsing. Cement is pumped down into the casing pipe using a bottom plug, cement slurry, and a top plug. Drilling mud provides enough pressure to force the cement slurry through the casing and down into the hole where it hardens and is later tested for alignment, durability and for providing a proper seal. The drilling mud is a very important component in the drilling process and is used to cool down the drill bit and prevent it from overheating. The drilling mud is an expensive composition of chemicals and abrasives. Most drilling rigs are designed to filter the mud because it is so costly.  

Two types of drilling technology used in the drilling of oil wells include:

[edit] Cable Tool Drilling

Cable drilling was the original method used to drill oil wells but it has since become outdated. It involves using a large pointed bit that is raised and then dropped into a hole to break up the rock into small pieces. The small fragments are removed from the hole using a bailing device. The practice of cable drilling has been replaced by more modern drilling technology such as rotary drilling.

[edit] Rotary Drilling

Rotary drilling relies on the use of very expensive equipment. A drilling contractor usually drills the surface hole a few feet and then lowers a pipe into the hole that follows the drill bit as it works its way further down into the ground. The pipe prevents the hole from caving in.

The well can be drilled vertically straight down. This is known as a conventional oil well. An oil well may also be drilled horizontally or at an angle. This is referred to as slant drilling or directional drilling.

[edit] Refining

Crude oil is made up of a mixture of hydrocarbons that differ in structure, properties, and molecular weight. Hydrocarbons are separated into groups or what the industry calls “fractions” through a process of distillation called refining. The first stage in the refining process is heating the oil up to a vapor. The vapor then passes up through a tower that contains trays at different levels. At the bottom of the tower, the vapors are very hot. However, as the vapors rise they become cooler and each of the different fractions condense in trays located at different heights in the tower. The lightest fractions always condense at the top of the tower. The lightest to heaviest crude oil fractions are: dissolved gases, petroleum ether, gasoline, kerosene, gas oil, lubricating oils, fuel oils, and asphalt. Another process called cracking is used to break down larger molecules of heavier fractions to produce gasoline, either by subjecting fractions to a high temperature and pressure or by using a chemical catalyst.Oil refining is not as fragmented as the drilling business or oil services industry. Instead, the sector is comprised of a handful of key players. The majority of these companies are vertically integrated with operations also based in oil production and marketing.

[edit] Transport

After petroleum is refined or processed into different types of petroleum products, it is moved either by ship, barge, truck, rail, or pipeline. Large ships known as supertankers transport oil and other petroleum products overseas.

[edit] Equipment List

• Blowout Preventer
• Circulation System
• Drill Collar
• Drilling Barge
• Drilling Rig
• Drilling Template
• Drillship
• Floating Production Storage and Offloading Vessel
• Frac Tank
• Jack-up
• Kelly
• Kill Truck
• Land Rig
• Mud Motor
• Rig-up Truck
• Roller Cone Bit
• Semisubmersible Rig
• Submersible Rig
• Swivel
• Tank Trailer - Petroleum
• Tension Leg Platform

[edit] References

1. ↑ About the Oil and Gas Industry. Careers in Oil and Gas [22-05-2009].
2. ↑ Upstream Oil and Gas Industry. Environment Canada. 22-05-2009.
3. ↑ Canadian Technology in the Oil and Gas Industry. Industry Canada. 22-05-2009.
4. ↑ Oil Industry Production Statistics. Gibson Consulting Online. 22-05-2009.
5. ↑ Petroleum Industries. The Canadian Encyclopedia. 22-05-2009.
6. ↑ The Petroleum Industry. Petroleum Industy.net. 22-05-2009.
7. ↑ The Petroleum Industry. Petroleum Industy.net. 22-05-2009.
8. ↑ Petroleum: Origins of the Industry. Pafko. 22-05-2009.
9. ↑ Petroleum: Origins of the Industry. Pafko. 22-05-2009.
10. ↑ Petroleum: Origins of the Industry. Pafko. 22-05-2009.
11. ↑ Petroleum: Origins of the Industry. Pafko. 22-05-2009.
12. ↑ Petroleum: Origins of the Industry. Pafko. 22-05-2009.
13. ↑ Petroleum Industries. The Canadian Encyclopedia. 22-05-2009.
14. ↑ Petroleum Industries. The Canadian Encyclopedia. 22-05-2009.
15. ↑ Petroleum Industries. The Canadian Encyclopedia. 22-05-2009.
16. ↑ Petroleum Industries. The Canadian Encyclopedia. 22-05-2009.
17. ↑ Oil Exploration and Discovery. The Greening Earth Society. 22-05-2009.