PETROLEUM INDUSTRY STRUCTURE PTRT 1301 Chapter 13

PTRT 1301 Chapter 13  Esso became Exxon, which renamed itself ExxonMobil when it acquired Mobil (formerly Socony) in  Socal became Chevron, which acquired most of Gulf Oil in 1985 and then Texaco in  Anglo-Persian Oil became Anglo-Iranian Oil in 1935 and then the British Petroleum Company in After acquiring Amoco (formerly Standard Oil of Indiana) in 1998 and making Atlantic Richfield Company (Arco) a subsidiary in 2000, British Petroleum officially changed its name to BP in 2001.

PTRT 1301 Chapter 13  Seven Sisters exerted considerable market power for many years over Third World oil producers. In 1973, the group controlled an estimated 85% of the world’s petroleum reserves.  In recent decades, however, the dominance of the Seven Sisters and their successors— OPEC, OECD, State Owned--commonly referred to as international oil companies (IOCs)—has been challenged on several fronts.

PTRT 1301 Chapter 13  In the late 1990s, the term supermajors became a more prevalent descriptor of the world’s largest IOCs, a group that in most compilations includes Total (based in France) and ConocoPhillips as well as ExxonMobil, Chevron, Shell, and BP.  In terms of remaining reserves for Oil/Gas as of 2011, Saudi Aramco had about 25 billion boe of gas and 200 billion boe of oil.  In terms of remaining reserves for Oil/Gas as of 2011, Gazprom had about 150 billion of boe of gas.

National Oil Companies  Solely owned and operated by their respective governments, (National Oil Companies) NOCs conducted their business with much less transparency than did the IOCs. In 2011, approximately 88% of global oil and gas reserves were controlled by state-owned oil companies, primarily located in the Middle East.

government-sponsored enterprise  Royal, Dutch, and Shell hybrid entity, part public and part government owned, is sometimes referred to as a government-sponsored enterprise (GSE).  Independents play a significant role in the upstream oil and gas business, operating chiefly in the United States but in several foreign countries as well. Independents receive nearly all of their revenues from exploration and production (production at wellhead).

PTRT 1301 Chapter 13  For a U.S. firm to be considered an independent producer, Internal Revenue Service regulations stipulate that its refining capacity must average less than 75,000 b/d or its retail sales must be less than $5 million per year.  PTTC Organization seeks to connect independents (companies) with the technology and knowledge to safely and responsibly develop the nation’s oil and gas resources.

PTRT 1301 Chapter 13  IPAA commissioned a study by IHS Global Insight (USA) evaluating the role of independents in the U.S. economy and reported independents Drilled 95.3% of onshore and 69.7% of offshore oil and gas wells, Produced 86.3% of onshore U.S. natural gas and 69.4% of offshore production, Operated most U.S. marginal wells (yielding less than 16 boe per day), which account for some 80% of the nation’s 800,000 producing wells.

U.S.-based independent oil and gas producers  Prominent publicly held U.S.-based independent oil and gas producers include the firms like Anadarko Petroleum, Noble Energy, and Devon Energy.  Independents based in other countries are also exerting an impact on global oil and gas production. Major foreign-based independents include Melbourne, Australia–based BHP Billiton, Bankers Petroleum, and British Gas and Cairn Energy (UK).

PTRT 1301 Chapter 13  Oil and gas producers large and small typically turn to specialty firms, called service companies, to conduct the hands-on work of building and operating drilling rigs.  Schlumberger (US) is a service company with market value of billion USD according to FT Global 500 in  Shell and Russia’s Gazprom formed an alliance to strengthen cooperation on projects in Russia and work together in other nations. This is an example of IOC working with NOC interacting since 2009.

PTRT 1301 Chapter 13  China spent more than $24 billion on overseas acquisitions—accounting for 20% of all global deals in the upstream oil and gas sector for the period from January through early November  OPEC‘s mission is to “coordinate and unify the petroleum policies of its Member Countries and ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers and a fair return on capital for those investing in the petroleum industry.”

PTRT 1301 Chapter 13  OPEC was originally formed by Venezuela, Iran, Iraq, Kuwait, and Saudi Arabia in Their membership has grown to 12 in recent years. In recent years they produced 40% of world’s crude and exports represent about 60% of all the oil traded internationally.  OPEC has not been effective as main price controller of oil and gas because of lack of accurate and timely information in oil gas demand, nonalignment of the interests of members, and geopolitical disruptions events.

PTRT 1301 Chapter 13  EIA reported that there were 142 operable refineries in the United States as of June Many of the largest are owned by well-known IOCs—the largest, in Baytown, Texas, by ExxonMobil with capacity of b/cd.  Dropping oil demand in 1980’s put pressure on refineries, and the first to shut down were those that had only simple distillation systems and little capability for subsequent upgrading (i.e., improving their downstream processing capability).

PTRT 1301 Chapter 13  In 1990s refiners used a process called debottlenecking. They used better matching of flow capacity among different units and making wider use of computer control. Motivated by environmental mandates (as well as economics), refiners also improved their upgrading capability.  Valero Refining in 2011 was considered one of the smaller refiners with a capacity of 6300 b/cd.

PTRT 1301 Chapter 13  In June 2011, EIA reported that U.S. oil-refining capacity increased to 17.7 million b/cd during 2010— its highest level in nearly three decades, with 148 refineries operating in January The Gulf Coast has more than twice the crude distillation capacity of any other region in the United States.  Valero Energy, Marathon Petroleum, Frontier Oil, Holly, and Sunoco (R&M) are good example of independent refiners that choose purchasing crude to refine it instead of getting involved in producing it in 2011.

PTRT 1301 Chapter 13  North America region is reported to have the world’s second largest refining capabilities (21,242 b/cd) in crude distillation in  Worldwide refining data shows number of refineries remained almost the same from 2006 to 2011 while the capacities were increasing to over 88 million b/d.  Ranked list of the world’s largest refiners number one (in crude capacity thousands b/cd) is ExxonMobil according to Oil & Gas Journal, Dec. 5, 2011.

PTRT 1301 Chapter 13  Sinopec is ranked number one in companies in Asia with at least 200,000 b/cd refining capacity, January 1,  ConocoPhillips is ranked number one in companies in the United States with at least 200,000 b/cd refining capacity, Jan. 1,  World’s largest refineries list, as of January 1, 2012, is Paraguana Refining Center in Venezuela.

China  China is the most ambitious planner (investor) in the future refinery projects in the world according to Oil & Gas Journal 2010.