Introduction to Oil & Gas Industry & OPEC PDF

Ineed to know An Introduction to the Oil Industry & OPEC gs Rig your guide Prof....

Ineed to know An Introduction to the Oil Industry & OPEC gs Rig your guide Prof. Riggs Prof. With  I need to know An Introduction to the Oil Industry & OPEC OPEC Secretariat Public Relations & Information Department All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means without the prior permission in writing of the OPEC Secretariat, or as expressly permitted by law, or under terms agreed with the appropriate reprographics rights organization. Enquiries should be addressed to the Head of PR and Information Department, OPEC, Helferstorferstrasse 17, Vienna 1010. © Organization of the Petroleum Exporting Countries, 2013 Second edition ISBN 978-3-200-02193-8 Designed and illustrated by Michael Haderer, Vienna, Austria The designation of geographical entities in this book, and the use and presentation of data and other materials, do not imply the expression of any opinion whatsoever on the part of the Organization of the Petroleum Exporting Countries (OPEC) and/or its Member Countries concerning the legal status of any country, territory or area, or of its authorities, or concerning the exploration, exploitation, refining and utilization of its petroleum or other energy resources. Printed by Ueberreuter Print GmbH, 2100 Korneuburg, Austria  This book is dedicated to children and all young people around the world.  Table of Contents Foreword.............................................................................................................. 09 Introduction.........................................................................................................10 Chapter 1 Oil Basics........................... 12—25 What is crude oil?............................................................................................... 12 What is petroleum?............................................................................................ 12 How is oil formed?..............................................................................................15 Oil properties....................................................................................................... 18 Light / Heavy.......................................................................................... 18 Sour / Sweet............................................................................................ 18 Reference crude oil............................................................................................ 19 6 A brief history of the industry...................................................................... 20 Why is oil important?........................................................................................22 How much oil does the world need?............................................................24 Chapter 2 Finding Oil (Upstream)........... 26—35 A big adventure begins!.............................................................................27 So how do we find oil..................................................................................27 Upstream.........................................................................................................27 Exploration..............................................................................................28 Production...............................................................................................30 Onshore....................................................................................................31 Offshore.................................................................................................. 32 Huge investments are required................................................................ 34 Prof. Ri ggs Hello! My name is Prof. Riggs and I will guide you through this exciting book. Chapter 3 Refining Oil (Downstream)........ 36—47 The adventure continues!............................................................................... 36 Downstream...................................................................................................... 36 Refining.................................................................................................... 37 Separation............................................................................................... 38 Conversion............................................................................................ 40 Treatment............................................................................................... 41 Transportation.......................................................................................42 Pipelines................................................................................................. 43 Roads and railway..................................................................................44 Ocean tankers........................................................................................46 Chapter 4 About OPEC........................ 48—63 Introduction.........................................................................................................50 Birth of OPEC................................................................................................... 52 The OPEC logo.................................................................................... 52 7 Who are the members of OPEC?............................................................... 56 Founder Members.................................................................................. 56 Full Members.......................................................................................... 56 Associate Members................................................................................. 56 Table OPEC Member Countries.......................................................... 57 Who can be a Member?......................................................................... 58 OPEC’s mission...............................................................................................59 Stabilizing oil markets............................................................................59 Keeping the market supplied...................................................................59 Organizational structure............................................................................... 60 The Conference..................................................................................... 60 Board of Governors............................................................................... 60 Economic Commission Board............................................................... 60 The Secretariat...................................................................................... 61 The OPEC Summit........................................................................................... 61 Building bridges.................................................................................................62 How does OPEC help other countries?.................................................... 63 What is OFID?................................................................................................. 63 Glossary of Terms.............................................................................................64 Bibliography & Resources..............................................................................66 8  Foreword T here is a first time for everything. This illustrated student’s guide to the oil industry is certainly an exciting first for OPEC. Similarly, preparing an introduction for it is a first for me. But it is a task of great importance. This book is not only about an industry that is central to the way we live today—and to the creation of economic opportunities around the world—it addresses people who will become the business and political leaders of tomorrow. Whether they live in oil consuming or producing countries like OPEC’s own Member Countries, the words in this book are directed at young people everywhere. The challenges of our world will someday be yours; and the more you know and understand about the world’s most important energy source—oil—the better prepared you will be to respond to the challenges of the future. Learning about the history of OPEC and its growing role in the 9 international community is also important. In many ways, the story of OPEC is the modern history of oil. Since its founding in 1960, OPEC has consistently sought to bring stability to the oil market. It has also tried to help others understand the workings of the oil industry, the activities of its Member Countries and many other aspects of a global industry. Now, more than 50 years later, OPEC continues to look for opportunities to further understanding, especially among the world’s young people. I sincerely hope you will enjoy this book. It aims to make learning about the oil industry—and OPEC’s role in it—interesting. It is with great pride that we present this book. It is my hope that after reading it, the oil industry will start to become as compelling to you as it has been for me, and the many men and women who have worked in it for many, many years. Abdalla Salem El-Badri Secretary General  Introduction I need to know: An Introduction to the Oil Industry and OPEC tells the story of oil. It tells how crude oil—or, using its more technical term, petroleum—was discovered, how it is explored and taken from the ground and made into other products. Over the last 150 years, oil has had many benefits and applications in our world— in industries, in medicine, at home and in transportation. It has shaped our world in many important ways. Although talking about oil and its production may sound complicated, this book is meant to simplify it. It is a book that both young people and adults can enjoy. It has been written so that novices can learn something about the origins of oil and the basics of the oil industry. Thus, the language used has been kept as non-technical as possible and the illustrations help to break down the complex nature of the topic. While this book is conceived as a history of oil, the reader will also 10 be able to learn about the Organization of the Petroleum Exporting Countries (OPEC), which celebrated its fiftieth anniversary in 2010. There is no doubt that turning fifty years old is a milestone. When OPEC was founded, few could have predicted that it would have lasted as long as it has. More than that, it has since developed into an important global actor. In fact, the slogan for OPEC’s Golden Jubilee year—“supporting stability, fuelling prosperity”—captures the essence of OPEC’s activities over the last fifty years, and reflects the work it has done in contributing to global economic growth. The book tries to raise awareness of the Organization’s important role in ensuring a regular and adequate supply of oil to the global markets. It also provides a summary of the founding of the Organization in 1960, explains its membership and structure, and considers some of the frequently asked questions that people have about OPEC. As OPEC’s Secretary General, Abdalla S. El-Badri, has noted in the past, “OPEC is the oldest surviving inter-governmental organization composed wholly of developing countries.” This is an admirable achievement, especially considering that it has survived a lot of challenges in the past. “governmental OPEC is the oldest surviving inter- organization composed wholly of developing countries.” Secretary General, Abdalla S. El-Badri, OPEC The book is divided into four chapters. Chapter I provides a brief history of the oil industry and highlights key facts about petroleum. This includes the origins of the word ‘petroleum’ and the definition of crude oil. It provides summary explanations about how crude oil was formed and why investments are so important for its ongoing development. 11 Chapter II describes how oil is found. It considers the investments that are needed for exploration projects and examines how much oil is needed around the world. Chapter III then focuses on how oil is extracted, brought to the market and refined into useful products. It identifies and explains the differences between the ‘upstream’ and the ‘downstream’ sectors of the industry. A description of the different ways of exploring for oil, as well as the various methods used to transport it, are also explained. Finally, Chapter IV provides an overview of the history of OPEC, explaining the background and the circumstances that led to its founding and the requirements for membership. There is also a brief description of the Organization’s overall mission and objectives, and an explanation of the Secretariat’s organizational structure. The commitment of OPEC Member Countries to assisting developing countries, which they pursue through the OPEC Fund for International Development (OFID), is also described. It is our hope that whoever reads this book will be able to better understand OPEC’s vital role in the global economy and the challenges it faces. As it enters its sixth decade, OPEC is well prepared to meet these new challenges.  Chapter 1 Oil Basics What is crude oil? Crude oil is an organic liquid substance often found below the Earth’s surface. It is made up of thousands of molecules composed of different hydrogen and carbon atoms. Such compounds are called hydrocarbons. Hydrogen Atom These hydrocarbons also contain different proportions of impurities like 12 oxygen, sulphur, nitrogen and heavy Hydrogen metal atoms. Atom Carbon Atom WHAT IS PETROLEUM? Prof. Riggs The word ‘petroleum’ is derived from the Latin petra (which means rock) and oleum (which means oil). It is commonly used to refer to crude oil, but it may also refer to other related hydrocarbons. Some hydrocarbons are gaseous, rather than liquid. Methane is the most common example of these hydrocarbon gases. This is the kind of natural gas that we most often use in our kitchens at home.  13 Crude oil is highly flammable and is an excellent source of energy. Its ‘sister’ hydrocarbon, natural gas, is another source of energy. Oil is called a non-renewable energy source because it cannot be replenished. Petroleum deposits are often found in natural underground reservoirs called oil fields. The oil in these fields can then be extracted by drilling and pumping.  Chapter 1. Oil Basics 14 Paleozoic Era 245 to 544 million years ago.  How is oil formed? O il is formed from the accumulation of hydrocarbons. Hydrocarbons accumulate naturally, thousands of feet below the surface of the Earth, from the decomposition of organic materials like plants and marine animals which died during the Palaeozoic Era (between 245 and 544 million years ago). Trapped beneath the ground under enormous pressure and high temperatures, these hydrocarbons were compressed and eventually transformed into crude oil after millions of years. 15 Dead organisms get trapped underground High temperatures and pressure transform dead organism into oil.  Chapter 1. Oil Basics Underground oil accumulations are formed when three conditions are met. First, there must be a ‘source’ rock rich in hydrocarbons and buried deep enough so that the heat from the Earth’s core can ‘cook’ them into oil. 16 Gas Prof. Riggs Oil Water lat d ion mu un cu ro Ac erg Oil Und  Second, there should be a porous rock nearby in which oil can accumulate (it is often sandstone). If the holes in the rock are interconnected, then oil can flow easily out of the rock. This condition is called permeability. The porous rock must have good permeability, ­which is why studying the structure of rocks is an important step to finding oil. Third, there is usually a ‘cap rock’ or seal to trap the oil in the underground reservoirs and prevent it from seeping to the surface. Within these reservoirs, hydrocarbons are typically organized like a 17 three-layer cake—with a layer of water below the oil and a layer of gas above it. Much of the oil that escapes to the surface often evaporates into the air. But it can leave behind deposits of residual hydrocarbons called bitumen. lat d ion mu un cu ro Ac erg Oil Und  Chapter 1. Oil Basics Oil properties C   rude oil properties can vary widely depending on where the oil is found and under what conditions it was formed. Its different physical properties are used to design the right kind of refineries, classify the oil (for example, West Texas Intermediate or Oman) and determine an appropriate price for it. The properties of oil include its density, called the API gravity (named after the American Petroleum Institute), sulphur content, nitrogen LIGHT content, carbon residue and distillation range. CRUDE Each of these properties is important for different reasons. For example, the sulphur content of crude oil is important because it determines the kind of treatment that it will require at a refinery. The higher the sulphur level, the bigger the effect it will have on the environment—and the more corrosive effect it will have on equipment. API gravity is also important. It is essentially a measure of density. It determines whether a specific type of crude oil has a higher or lower 18 boiling range (or distillate yields), which is important for separating and extracting different parts (or fractions). Different oil-producing areas produce different kinds of crude oil. And depending on its mixture of hydrocarbons, crude oil can vary in colour, composition and consistency.  It is quite common to classify crude oil into different types or grades. The following classifications are most common. Light / Heavy Crude oil can be classified as either light or heavy depending on its API gravity (or density). Generally, the higher its API gravity, the lower its density. Oil that is lighter in colour, has a thin consistency and flows easily usually contains less metals and sulphur compounds. It is known as light oil. Oil that is high in metal and sulphur content is considered low-grade oil. It generally has too much carbon, not enough hydrogen and is more time- consuming to produce and hard to refine. It is known as heavy oil. Sour / Sweet Crude oil can also be classified as either sour or sweet, depending on the amount of sulphur it contains. Oil with a high sulphur content (0.5% and above, by weight) is considered sour. 19 Sweet crude oil, on the other hand, has low amounts of these sulphur compounds. REFERENCE CRUDE OIL Some common crude oil types are used as a reference or benchmark to determine the value of other crude oils. Some of these reference crude oils are: Brent Blend Dubai-Oman Tapis Crude West Texas A blend of several crude oils from fields in the North Used as a benchmark for Middle Oil produced in Malaysia Intermediate (WTI) Sea region, located above Germany and the United East sour crude oil flowing to the that is used as a A very high-quality, Kingdom. The price of oil produced in Africa, Europe Asia-Pacific region. reference for light oil sweet, light oil produced in and the Middle East tends to be based on this oil. from East Asia. North America.  Chapter 1. Oil Basics A brief history of the industry T he world’s first oil wells were drilled in China around the 4th century AD. The Chinese used simple bamboo poles to drill these wells. The dark, sticky material they extracted was then used primarily as a source of fuel. In later centuries, oil was found across Asia and Europe. Sometimes it accumulates in natural pools above the ground. Travellers and settlers used the mysterious black liquid for fuel, as well as for medical treatment. The modern oil industry began in the mid-19th century. On August 27, 1859, Colonel Edwin Drake discovered the 20 first underground oil reservoir near Titusville, Pennsylvania (USA), after drilling a well only 21 metres (69 feet) deep. The oil flowed easily. It was also easy to work with and distil. This oil was known as a paraffin type of oil. Drake worked for the Pennsylvania Rock Oil Company which wanted to use the oil to light street lamps. Drake’s well initially produced 30 barrels of oil per day (b/d). (One barrel is equal to 159 litres or 42 US gallons). Its success marked the beginning of the modern oil industry. Oil soon began to receive more attention from the scientific community. After some research, a variety of products were eventually developed from crude oil. For example, kerosene for heating was one of the first products. Soon other products (like gasoline and diesel to run engines) were also on the market. In 1890, the mass production of automobiles began creating a huge demand for gasoline and pushing companies to find more oil fields. 21  Chapter 1. Oil Basics Why is oil important? Crude oil is a central part of modern life and the world’s most important energy resource. We rely on it in many ways for the food we eat, the clothes we wear and the electronics we use at home and in the workplace. Without oil, we would not be able to continue to enjoy the same standard of living. Tires 22 Gasoline Deod oran t r 3 playe Diape rs MP ll ba ot Fo  T he way people live, work and travel all depend on oil. Oil is, in fact, the world’s most important transportation fuel. About 90% of all transportation fuels come from crude oil. Jet fuel It is also the raw material from which other important products are made, which have improved the quality of our lives over the past century and a half. It has been used to keep people’s houses warm during the winter for centuries. Artificial heart 23 Aspiri n Shampoo Synthetic fibres Lipstick But oil is also used to make medicines, plastics and cleaning products. In fact, modern life as we know it today would be impossible without oil and its products. Many of the everyday items people use are either made from oil or are dependent on oil for their production. Some of these products include heating oil, jet fuel, kerosene, dentures, diapers, fertilizers, lipstick, shampoo, deodorant, shaving cream, crayons, musical devices, cameras, computers, glue, contact lenses, toothpaste, synthetic fibres, tires, artificial hearts and even aspirin. So now you have an idea of how important oil is in our daily life!  Chapter 1. Oil Basics NORTH AMERICA 24 SOUTH AMERICA EUROPE ASIA & PACIFIC How much Oil 25 AFRICA does the world need? T he world needs more energy as its population grows and as countries become more economically prosperous. The United States has the world’s largest demand for oil. Although it has only about 5% of total world population, it uses nearly 25% of the world’s total oil production and 45% of the world’s total gasoline production. And as the economies of countries like Brazil Russia, India and China become richer, and their economies expand, their need for more oil will grow. To meet all this demand for oil without provoking market imbalances, the right supply levels are needed. Measuring this is always a challenge for the experts who work in the oil industry.  Chapter 2 Finding Oil Upstream 26  A big adventure begins! F inding oil and getting it out of the ground is a challenging and exciting activity. It requires great effort and travel to distant lands—and the results can often be surprising. So how do we find oil? It starts with the simple decision to explore for oil based on preliminary survey data. Once oil is discovered, the initial results are tested. If the results are good, then the development of a production well begins. Because of the importance of oil in our lives, it is necessary to understand how the industry as a whole works in both its upstream and downstream sectors. For this, it is helpful to look at the oil industry by first considering what is called the upstream sector. Upstream The upstream sector is the part of the oil industry involved with finding oil fields and bringing oil up from the ground. Upstream activities include exploratory work, such as the search for underground (or underwater) oil and gas reservoirs, and the initial drilling, followed by the production 27 phase, which is the actual extraction of oil from the ground.  Chapter 2. Finding Oil (Upstream) Exploration E xploration is almost like detective work. It requires looking for clues, careful observation of ground conditions, taking notes of different information and the evaluation of survey data. This is the job of petroleum geoscientists, who are experts on rocks. Petroleum geoscientists working at oil companies begin looking for places where there might be oil. They look for signs that may indicate the presence of hydrocarbons underground and are responsible for determining the best places to drill. They start by examining the shapes of different underground layers of rock. They have to use special tools in order to ‘see’ the rocks underground. Thus, using advanced technology—and special tools like aerial photography, satellite pictures and specialized machines that measure variations in the Earth’s gravity and magnetic fields— geoscientists try to identify likely crude oil fields. 28  O il can also be found underground at the bottom of the sea. In this case, special ships are used to look for these underwater oil fields. Geoscientists use several special technical tools—such as sound waves used in seismic technology—to form a clear picture of underwater rock layers. But the only way to be absolutely sure that there is oil in the ground is simply to drill a well. This is a big gamble because not all wells result in the discovery of oil. It may take the drilling of many different wells until a new oil field is found. This costs a large amount of money because sophisticated equipment is needed and many people need to be hired. That is why the geoscientists then supply all their survey data to the economists and financial planners at the oil companies, who help make the decision whether or not to drill exploratory wells. 29 Surveyors record the seismic waves that are produced by an explosion or sound generator. Since different rock types reflect sound waves differently, the surveyor can create a picture of the subterranean rocks. eyor Surv Explo sion dw aves Soun  Chapter 2. Finding Oil (Upstream) Production Once oil is found after the preliminary exploration phase and the drilling of exploratory wells, the Crude oil found underground is usually mixed production phase can begin. There are two with water, sand, salt and natural gas. As it is forms of drilling: onshore and offshore. extracted, the pressure of these different substances must be kept at just the right levels. This is done by turning valves on and off at the surface level. Because these valves are often green in colour and the small dials are red, much like the pine trees decorated at Christmas time, this assembly is often referred to as 30 a Christmas tree. ks an et ag or St Prof. Ri ggs  Onshore drilling Onshore drilling is used for underground oil reservoirs anywhere on dry land. Drilling on land generally requires relatively low investments and entails fewer risks. Once the crude oil is extracted from the ground, it is taken to gathering centres where the water, sand and salt are removed. While there, natural gas is also separated from the crude oil and then sent to a booster station. The oil is then pumped to storage tanks before being sent to either a refinery for proper processing or to oil tankers for shipment elsewhere. 31 g pin m Pu Dr illin g Tricone bit  Chapter 2. Finding Oil (Upstream) 32  33 OFFshore drilling Offshore drilling is used to extract oil deposits buried under the ocean floor. Offshore drilling rigs are installed, operated and serviced on large platforms built out in the ocean. These platforms can either float or sit on tall ‘legs’ that touch the seabed. In this way, the offshore rig is able to remain stable and resist waves, wind and, in colder regions, floating chunks of ice. Because of its difficulty, offshore drilling consumes more than 65% of planned investments even before oil is extracted, increasing the risk of financial losses, especially if wells come up dry!  Chapter 2. Finding Oil (Upstream) Huge investments are required Finding underground oil reservoirs and drilling wells are risky, complicated and expensive activities. The cost of drilling an exploratory oil well can be anything from $1 million to $35 million. Building and developing a well depends on many factors: the location of the potential oil field (if it is on land or under water), the size of the oil field, the amount of information that is already available and the type of rocks found underground. That is why an important first step before drilling a well is to obtain 34 information about what is going on thousands of metres below the surface of the Earth. This requires careful exploration and mapping of the ‘sub-surfaces’ in order to locate the exact type of rocks that tend to have oil deposits. All this requires investments in the latest geographic and seismic technology. Prof. Riggs  Many oil fields are found in hard-to-reach areas on land or below deep ocean water. New technology is helping oil companies reach these oil fields and increase the amount of oil extracted from the ground. But in order to pay for new technology, hundreds of millions of dollars in investments are needed. The average amount of time needed to discover, extract and market oil is between 3 to 10 years. But oil explorers also need time to raise the necessary money in order to deal with all the technical challenges. 35 Much of the time needed depends on the location of the oil field. An offshore oil field in deep water can take much longer to discover and test, especially when the sea bottom is thousands of metres below the surface.  Chapter 3 Refining Oil Downstream THE ADVENTURE CONTINUES! The story doesn’t end once crude oil is found 36 and produced from a well. More hard work is needed in order to get the crude oil to the marketplace and to turn it into products that can be used easily by consumers. SO WHAT HAPPENS AFTER WE FIND OIL? Once oil starts flowing, it needs to be extracted in large volumes and then taken to special sites where it is treated carefully before being Prof. Ri ggs transported internationally. DOWNSTREAM The downstream sector is the part of the oil industry involved with purifying crude oil and refining it into different products. It also involves the transportation and marketing of crude oil and its products.  The process through which crude oil is purified and treated to remove unusable substances is called REFINING. This process is also used to separate oil into different usable petroleum products. All this takes place in an oil refinery. All refineries perform three basic functions: Separation Conversion Treatment. 37 Refineries are highly automated and technologically advanced. That is why a typical refinery costs billions of dollars to build. It also costs millions to operate, employing hundreds of people and running every day of the year.  Chapter 3. Refining Oil (Downstream) SEPARATION In this phase, a refinery heats crude oil to different temperature levels. Different parts of crude oil have different boiling points. As the temperature rises, these different parts or fractions are separated. This is done inside distillation towers. The lightest fractions, which include gasoline and Liquefied Petroleum Gas (LPG), vaporize quickly and rise to the top of the distillation towers. There they condense back into liquids. The medium-weight fractions, which include kerosene and 38 diesel oil distillates condense in the middle of the distillation tower. The heaviest liquids (called residual oils) have the highest boiling points and leave through the bottom of the distillation tower. gs Prof. Rig Refineries also use chemical agents called CATALYSTS. These help refine oil further by either removing carbon or adding hydrogen.  20°C Refining methods are constantly being LPG improved. A variety of complex operations are now used which have improved their 70°C output. Refineries today turn more than half Gasoline of every barrel of crude oil into gasoline. One barrel is equal to 159 litres (42 US gallons). This is a big advance from only 70 years ago 120°C when only 41 litres (11 gallons) of gasoline Naphta were produced from each barrel of crude. 39 170°C Jet fuels 270°C Diesel 450°C Fuel for ships 600°C Bitumen 800°C  Chapter 3. Refining Oil (Downstream) Separation Conversion In this phase, high temperatures and pressure, as well as chemical catalysts, are used to ‘crack’ or split heavy hydrocarbon molecules into smaller, more desirable ones. This is the most widely used conversion method and it is called CRACKING. This is carried out in Fluid a cracking unit which consists Catalytic of a reactor with a thick wall, and Cracker a network of large furnaces, dividers and compartments. 40 Coker Other refining processes can rearrange hydrocarbon molecules rather than simply splitting them, while other processes clean them of impurities like sulphur (a process called desulphurization) which are harmful to the environment. Prof. Ri ggs Refineries also treat the wastes produced by the refining process. This helps to minimize air and water pollution. Modern refineries are equipped with advanced pollution control systems. They purify waste water, remove chemicals and capture the emissions of gases and toxic materials.  An oil refinery is a network of interconnected buildings and plants where oil is pre-treated and divided into different parts or fractions. Naphta These fractions are then converted, treated Hydrotreater further and blended to produce specific oil products according to pre-set specifications. Kerosene Hydrotreater Gasoline Hydrotreater 41 Treatment The final phase is treatment. In this step, the fractions produced during separation are treated to improve their quality. They are then blended with other elements to produce the Diesel final products. Hydrotreater A variety of products can be made from crude oil, including gasoline, jet fuel, kerosene, diesel and petroleum COKE. In addition to fuel oils, refineries can produce other oil-based products like asphalt, cleaning products, The different products are later paints—and even some of the components used to placed in large storage tanks until they make chewing gum and diapers! can be delivered to places such as gas stations, airports and chemical plants.  Chapter 3. Refining Oil (Downstream) Transportation The transportation and delivery of crude oil is a big global business and an important part of the downstream sector. It includes the transfer of crude oil to the consuming countries and the distribution and sale of the products made from crude oil. Getting oil from a well to a refinery, and getting the products to service stations, requires a complex system of transportation and storage. In fact, millions of barrels of oil are transported around the world every day through these pipeline networks, on fleets of tankers and on thousands of railway tanks and trucks. 42 s Rigg Prof.  Pipelines Oil pipelines are made from steel. They usually have an inner diameter of about 10 to 120 cm (about 4 to 48 inches) and can run for hundreds or thousands of kilometres. Advances in technology are constantly improving the size and strength of these pipelines. Although pipelines are less flexible than other forms of transportation, they are the safest, most efficient and most economical way to move oil. All large modern oil fields have direct connections to major pipelines. Without these pipelines, it would be impossible for 43 oil and oil products to reach consumers.  Chapter 3. Refining Oil (Downstream) Roads AND railway Oil products are also transported from storage centres to distribution areas on specialized railway tankers and trucks. These are large, long and have special storage units to protect against accidents. 44  Since oil and oil products like gasoline are highly flammable, they need to be transported carefully. If not, they can 45 easily start fires or large explosions.  Chapter 3. Refining Oil (Downstream) Ocean tankers Oil tankers are large, specialized ocean- going ships specifically built to carry unrefined crude oil from one part of the world to another. They usually carry oil from where it is produced to where it is refined and consumed. 46  47 Oil tankers are classified by their size, which can range from small coastal tankers to ultra- large crude carriers (ULCC). The largest tankers often travel from the Gulf region and West Africa to Japan and other Asian countries. Other tankers travel to the northeastern United States and to countries across the Mediterranean region.  OPEC’S MISSION OPEC’s mission is to coordinate oil policies in its Member Countries and help stabilize oil markets. It also includes working together—to make sure there is always a regular supply of oil available to consumers, and to make sure a steady income is generated for producers. All this is formally stated in the OPEC Statute. 48 49  Chapter 4. About OPEC Finally, let’s discuss the Organization known as OPEC The Organization of the Petroleum Exporting Countries (OPEC) is an intergovernmental organization currently made up of twelve oil exporting countries that work together to coordinate their petroleum policies. The Organization was formed in response to the activities and practices of seven large international oil companies (IOCs) known as the “Seven Sisters”. The activities of these IOCs were often detrimental to the growth and development of the oil- producing host countries, whose natural resources they exploited. The first move towards the establishment of OPEC can be traced 50 back to 1949, when Venezuela approached four other oil- producing developing countries—Iran, Iraq, Kuwait and Saudi Arabia—to suggest that they explore avenues for regular and closer cooperation on oil matters. But the main impetus for OPEC’s birth came a decade later, after the IOCs had decided to reduce the price of oil without first asking the governments. In response, several oil-producing countries decided to hold a meeting in Cairo, Egypt, in 1959. This was the First Arab Petroleum Congress. Iran and Venezuela were invited as observers. ggs Prof. Ri The meeting adopted a resolution asking IOCs to consult the governments of oil-producing countries before changing the posted price of oil. But the IOCs ignored the oil-producing countries. And in August 1960, they once again lowered the price of oil.  1959 150 120 90 60 30 0 30 60 90 120 150 180 ARCTIC OCEAN ARCTIC OCEAN Laptev Sea Baffin East Siberian Sea Beaufort Sea Bay Chukchi Sea Arctic Circle (66°33') Arctic Circle (66°33') Great Bear Lake Denmark Davis Strait 1949 Strait Lake Ladoga Lake Great 60 Slave Lake Hudson Onega 60 Bay Gulf of Alaska Labrador Bering Sea Sea Lake Sea of Baikal Okhotsk Lake Winnipeg Gulf of Lake St. Lawrence Superior Lake Lake Balkhash Huron Aral Lake Sea Michigan Lake Ontario NORTH Lake Erie Sea of NORTH PACIFIC NORTH Japan PACIFIC OCEAN ATLANTIC Yellow Sea OCEAN OCEAN 30 30 East China Sea Persian Gulf Gulf of Mexico Gulf of Oman Tropic of Cancer (23°27') Tropic of Cancer (23°27') Red Sea Luzon Gulf of Strait Philippine Tonkin Sea Bay of Caribbean Sea Bengal Arabian South China Gulf of Aden Sea Sea Andaman Sea Gulf of Thailand Laccadive Sea Celebes Sea Gulf of Guinea Equator Equator Equator 0 0 Lake Victoria Java Sea Banda Sea Lake Tanganyika Arafura Lake Sea Nyasa Timor Sea Great Lago Titicaca SOUTH INDIAN Gulf of Carpentaria Coral Sea Barrier ATLANTIC OCEAN Reef Mozambique OCEAN Channel Tropic of Capricorn (23°27')