Thepetroleum industry, also known as theoil industry, includes the global processes ofexploration,extraction,refining,transportation (often byoil tankers andpipelines), andmarketing ofpetroleum products. The largest volume products of the industry arefuel oil andgasoline (petrol).Petroleum is also the raw material for manychemical products, includingpharmaceuticals,solvents,fertilizers,pesticides, syntheticfragrances, andplastics. The industry is usually divided into three major components:upstream,midstream, anddownstream. Upstream regards exploration and extraction ofcrude oil, midstream encompasses transportation andstorage of it, and downstream concerns refining crude oil into variousend products.
Petroleum is vital to many industries, and is necessary for the maintenance of industrialcivilization in its current configuration, making it a critical concern for many nations. Oil accounts for a large percentage of the world'senergy consumption, ranging from a low of 32% for Europe and Asia, to a high of 53% for the Middle East.
Other geographic regions' consumption patterns are as follows:South andCentral America (44%),Africa (41%), andNorth America (40%). The world consumes 36 billionbarrels (5.8 km3) of oil per year,[1] withdeveloped nations being the largest consumers. TheUnited States consumed 18% of the oil produced in 2015.[2] The production, distribution, refining, and retailing of petroleum taken as a whole represents the world's largest industry in terms of dollar value.
Petroleum is a naturally occurring liquid found in rock formations. It consists of a complex mixture of hydrocarbons of various molecular weights, plus other organic compounds. It is generally accepted that oil is formed mostly from the carbon rich remains of ancient plankton after exposure to heat and pressure inEarth's crust over hundreds of millions of years. Over time, the decayed residue was covered by layers of mud and silt, sinking further down intoEarth's crust and preserved there between hot and pressured layers, gradually transforming intooil reservoirs.[3]
Petroleum in an unrefined state has been utilized by humans for over 5000 years. Oil in general has been used since earlyhuman history to keep fires ablaze and inwarfare.
Its importance to theworld economy however, evolved slowly, withwhale oil being used for lighting in the 19th century and wood and coal used for heating and cooking well into the 20th century. Even though theIndustrial Revolution generated an increasing need for energy, this was initially met mainly by coal, and from other sources including whale oil. However, when it was discovered thatkerosene could be extracted fromcrude oil and used as a lighting and heating fuel, the demand for petroleum increased greatly, and by the early twentieth century had become the most valuable commodity traded on world markets.[4]
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Imperial Russia produced 3,500 tons of oil in 1825 and doubled its output by mid-century.[8] After oil drilling began in the region of present-dayAzerbaijan in 1846, inBaku, theRussian Empire built two large pipelines: the 833 km long pipeline to transport oil from theCaspian to theBlack Sea port ofBatum (Baku-Batum pipeline), completed in 1906, and the 162 km long pipeline to carry oil fromChechnya to the Caspian. The first drilled oil wells in Baku were built in 1871–1872 byIvan Mirzoev, anArmenian businessman who is referred to as one of the 'founding fathers' of Baku's oil industry.[9][10]
At the turn of the 20th century, Imperial Russia's output of oil, almost entirely from theApsheron Peninsula, accounted for half of the world's production and dominated international markets.[11] Nearly 200 small refineries operated in the suburbs of Baku by 1884.[12] As a side effect of these early developments, the Apsheron Peninsula emerged as the world's "oldest legacy of oil pollution and environmental negligence".[13] In 1846 Baku (Bibi-Heybat settlement) featured the first ever well drilled with percussion tools to a depth of 21 meters for oil exploration. In 1878Ludvig Nobel and hisBranobel company "revolutionized oil transport" by commissioning the firstoil tanker and launching it on theCaspian Sea.[11]
Samuel Kier established America's first oil refinery in Pittsburgh on Seventh avenue near Grant Street in 1853.Ignacy Łukasiewicz built one of the first modern oil-refineries nearJasło (then in the Austrian dependentKingdom of Galicia and Lodomeria inCentral European Galicia), present-day Poland, in 1854–56.[14] Galician refineries were initially small, as demand for refined fuel was limited. The refined products were used in artificial asphalt, machine oil and lubricants, in addition to Łukasiewicz'skerosene lamp. As kerosene lamps gained popularity, the refining industry grew in the area.
Thefirst commercial oil-well in Canada became operational in 1858 atOil Springs, Ontario (thenCanada West).[15] BusinessmanJames Miller Williams dug several wells between 1855 and 1858 before discovering a rich reserve of oil four metres below ground.[16][17] Williams extracted 1.5 million litres of crude oil by 1860, refining much of it into kerosene-lamp oil.[15] Some historians challenge Canada's claim to North America's firstoil field, arguing thatPennsylvania's famousDrake Well was the continent's first. But there is evidence to support Williams, not least of which is that the Drake well did not come into production until August 28, 1859. The controversial point might be that Williams found oil above bedrock whileEdwin Drake's well located oil within a bedrockreservoir. The discovery at Oil Springs touched off an oil boom which brought hundreds of speculators and workers to the area. Canada's first gusher (flowing well) erupted on January 16, 1862, when local oil-man John Shaw struck oil at 158 feet (48 m).[18] For a week the oil gushed unchecked at levels reported as high as 3,000 barrels per day.
The first modern oil-drilling in the United States began in West Virginia and Pennsylvania in the 1850s.Edwin Drake's 1859 well nearTitusville, Pennsylvania, typically considered[by whom?] the first true[citation needed] modern[citation needed]oil well, touched off a major boom.[19][20][21][need quotation to verify] In the first quarter of the 20th century, the United States overtook Russia as the world's largest oil producer. By the 1920s, oil fields had been established in many countries including Canada, Poland, Sweden, Ukraine, the United States, Peru and Venezuela.[21]
The first successfuloil tanker, theZoroaster, was built in 1878 in Sweden, designed byLudvig Nobel. It operated fromBaku toAstrakhan.[22] A number of new tanker designs developed in the 1880s.[23]
In the early 1930sthe Texas Company developed the first mobile steel barges for drilling in the brackish coastal areas of theGulf of Mexico. In 1937Pure Oil Company (now part ofChevron Corporation) and its partnerSuperior Oil Company (now part ofExxonMobil Corporation) used a fixed platform to develop a field in 14 feet (4.3 m) of water, one mile (1.6 km) offshore ofCalcasieu Parish, Louisiana. In early 1947 Superior Oil erected a drilling/productionoil-platform in 20 ft (6.1 m) of water some 18 miles[vague] offVermilion Parish, Louisiana.Kerr-McGee Oil Industries, as operator for partnersPhillips Petroleum (ConocoPhillips) andStanolind Oil & Gas (BP), completed its historic Ship Shoal Block 32 well in November 1947, months before Superior actually drilled a discovery from their Vermilion platform farther offshore. In any case, that made Kerr-McGee's Gulf of Mexico well, Kermac No. 16, the first oil discovery drilled out of sight of land.[24][page needed][25] Forty-four Gulf of Mexico exploratory wells discovered 11 oil and natural gas fields by the end of 1949.[26]
DuringWorld War II (1939–1945)control of oil supply from Romania, Baku, the Middle East and theDutch East Indies played a huge role in the events of the war and the ultimate victory of theAllies. TheAnglo-Soviet invasion of Iran (1941) secured Allied control of oil-production in the Middle East. The expansion ofImperial Japan to the south aimed largely at accessing the oil-fields of the Dutch East Indies. Germany, cut off from sea-borne oil supplies byAllied blockade, failed inOperation Edelweiss to secure theCaucasus oil-fields for theAxis military in 1942, while Romania deprived theWehrmacht of access toPloesti oilfields – the largest in Europe – from August 1944. Cutting off the East Indies oil-supply (especially viasubmarine campaigns) considerably weakenedJapan in the latter part of the war. After World War II ended in 1945, the countries of theMiddle East took the lead in oil production from the United States. Important developments since World War II include deep-water drilling, the introduction of thedrillship, and the growth of a global shipping network for petroleum – relying upon oil tankers and pipelines. In 1949 the first offshore oil-drilling at Oil Rocks (Neft Dashlari) in the Caspian Sea off Azerbaijan eventually resulted in a city built on pylons. In the 1960s and 1970s, multi-governmental organizations of oil–producing nations –OPEC andOAPEC – played a major role in setting petroleum prices and policy.Oil spills and their cleanup have become an issue of increasing political, environmental, and economic importance. New fields of hydrocarbon production developed in places such as Siberia,Sakhalin,Venezuela and North and West Africa.[citation needed]
With the advent of hydraulic fracturing and otherhorizontal drilling techniques, shale play has seen an enormous uptick in production. Areas of shale such as thePermian Basin andEagle-Ford have become huge hotbeds of production for the largest oil corporations in the United States.[27]
TheAmerican Petroleum Institute divides the petroleum industry into five sectors:[28]
Oil companies used to be classified by sales as"supermajors" (BP,Chevron,ExxonMobil,ConocoPhillips,Shell,Eni andTotalEnergies),"majors", and"independents" or "jobbers". In recent years however, National Oil Companies (NOC, as opposed to IOC, International Oil Companies) have come to control the rights over the largest oil reserves; by this measure the top ten companies all are NOC. The following table shows the ten largest national oil companies ranked by reserves[29][30] and by production in 2012.[31]
| Rank | Company (Reserves) | Worldwide Liquids Reserves (109 bbl) | Worldwide Natural Gas Reserves (1012 ft3) | Total Reserves in Oil Equivalent Barrels (109 bbl) | Company (Production) | Output (Millionsbbl/day)[1] | |
|---|---|---|---|---|---|---|---|
| 1 |  Saudi Aramco | 260 | 254 | 303 | Saudi Aramco | 12.5 | |
| 2 |  NIOC | 138 | 948 | 300 | NIOC | 6.4 | |
| 3 |  QatarEnergy | 15 | 905 | 170 |  ExxonMobil | 5.3 | |
| 4 |  INOC | 116 | 120 | 134 |  PetroChina | 4.4 | |
| 5 |  PDVSA | 99 | 171 | 129 |  BP | 4.1 | |
| 6 |  ADNOC | 92 | 199 | 126 |  Royal Dutch Shell | 3.9 | |
| 7 |  Pemex | 102 | 56 | 111 | Pemex | 3.6 | |
| 8 |  NNPC | 36 | 184 | 68 | Chevron | 3.5 | |
| 9 |  NOC | 41 | 50 | 50 |  Kuwait Petroleum Corporation | 3.2 | |
| 10 |  Sonatrach | 12 | 159 | 39 | ADNOC | 2.9 | |
| ^1 : Total energy output, includingnatural gas (converted to bbl of oil) for companies producing both. | |||||||
Most upstream work in theoil field or on anoil well iscontracted out to drilling contractors and oil field service companies.[citation needed]
Aside from the NOCs which dominate the Upstream sector, there are many international companies that have a market share. For example:[32]
Midstream operations are sometimes classified within the downstream sector, but these operations compose a separate and discrete sector of the petroleum industry. Midstream operations and processes include the following:
While some upstream companies carry out certain midstream operations, the midstream sector is dominated by a number of companies that specialize in these services. Midstream companies include:
The oil and gas industry spends only 0.4% of its net sales on research & development (R&D) which is in comparison with a range of other industries the lowest share.[36] Governments such as the United States government provide a heavy publicsubsidy to petroleum companies, with major tax breaks at various stages of oil exploration and extraction, including the costs of oil field leases and drilling equipment.[37] In recent years,enhanced oil recovery techniques – most notably multi-stage drilling andhydraulic fracturing ("fracking") – have moved to the forefront of the industry as this new technology plays a crucial and controversial role in new methods of oil extraction.[38]
Some petroleum industry operations have been responsible forwater pollution through by-products of refining andoil spills. Though hydraulic fracturing has significantly increased natural gas extraction, there is some belief and evidence to support that consumable water has seen increased in methane contamination due to this gas extraction.[39] Leaks from underground tanks and abandoned refineries may also contaminate groundwater in surrounding areas. Hydrocarbons that comprise refined petroleum are resistant to biodegradation and have been found to remain present in contaminated soils for years.[40] To hasten this process,bioremediation of petroleum hydrocarbon pollutants is often employed by means of aerobic degradation.[41] More recently, other bioremediative methods have been explored such asphytoremediation and thermal remediation.[42][43]
The industry is the largest industrial source of emissions of volatile organic compounds (VOCs), a group of chemicals that contribute to the formation of ground-levelozone (smog).[44] The combustion of fossil fuels producesgreenhouse gases and other air pollutants as by-products. Pollutants includenitrogen oxides,sulphur dioxide,volatile organic compounds andheavy metals.
Researchers have discovered that thepetrochemical industry can produce ground-level ozone pollution at higher amounts in winter than in summer.[45]
Greenhouse gases caused by burningfossil fuels driveclimate change. In 1959, at a symposium organised by theAmerican Petroleum Institute for the centennial of theAmerican oil industry, thephysicistEdward Teller warned of the danger of globalclimate change.[46] Edward Teller explained that carbon dioxide "in the atmosphere causes agreenhouse effect" and that burning morefossil fuels could "melt the icecaps and submerge New York".[46]
TheIntergovernmental Panel on Climate Change, founded by theUnited Nations in 1988, concludes thathuman-sourcedgreenhouse gases areresponsible for most of theobserved temperature increase since the middle of the twentieth century.
As a result of climate change concerns, many people have begun using other methods of energy such as solar and wind. This recent shift has some petroleum enthusiasts skeptical about the future of the industry.[47]
The North American oil industry began in Oil Springs in 1858 in less spectacular fashion. James Miller Williams, a coachmaker from Hamilton, dug into the tar-like gum beds of Enniskillen Township to find their source. At a depth of fourteen feet, he struck oil. Williams immediately built a small refinery and began to produce illuminating oil for lamps – kerosene. It was Williams who was able to take full advantage of the ancient resource. Not only was he astute enough to look below the surface of the gum beds to find oil and to realize its commercial potential, but the timing of his discovery was perfect.
Our correspondent writes us from the Oil Springs, under date of the 16th inst., [an] interesting account of a flowing Oil well which has just been tapped. He says: I have just time to mention that to-day at half past eleven o'clock, a.m., Mr. John Shaw, from Kingston, C. W., tapped a vein of oil in his well, at a depth of one hundred and fifty-eight feet in the rock, which filled the surface well, (forty-five feet to the rock) and the conductors [sic] in the course of fifteen minutes, and immediately commenced flowing. It will hardly be credited, but nevertheless such is the case, that the present enormous flow of oil cannot be estimated at less than two thousand barrels per day, (twenty-four hours), of pure oil, and the quantity increasing every hour. I saw three men in the course of one hour, fill fifty barrels from the flow of oil, which is running away in every direction; the flat presenting the appearance of a sea of oil. The excitement is intense, and hundreds are rushing from every quarter to see this extraordinary well. Experience oil well diggers from the other side, affirm that this week equals their best flowing wells in Pennsylvania, and they pronounced the oil as being of a superior quality. This flowing well is situation on lot No. 10, Range B, Messrs. Sanborn & Co.'s Oil Territory.
In August 1859, an important early well was drilled by Edwin Drake outside Titusville, initiating the Pennsylvania oil boom.
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