PEE 101 – INTRODUCTION TO PETROLEUM AND GAS INDUSTRY

(3 CREDITS)
Oil and Gas Processing and Transportation

Learning Outcomes
Upon completing these modules, students should be able to:
1. Describe the fundamentals of oil and gas production.
2. Explain the steps involved in the three main activities of oil and gas production.
3. Understand the importance of processing oil and gas, as well as the safe transportation of
finished petroleum products to consumers and the general public.

Introduction to Oil and Gas Production

Petroleum (oil or crude oil) and natural gas is a complex mixture of naturally occurring
hydrocarbon compounds found in rock which has been formed over thousands of years by heat
and pressure turning organic matter to oil and gas. Impurities such as Sulphur, oxygen and nitrogen
are common in petroleum. There is also considerable variation in colour, odour, Sulphur content
and viscosity in petroleum from different areas. Petroleum products include gasoline, heating oil,
propane, kerosene, diesel, naphtha, etc.

Oil and gas production is the general process of manufacturing oil and natural gas from wells and
turning them into the final petroleum products that consumers can use. Oil and gas production
includes systematic steps starting from the site exploration, to actual extraction, and even up to the
distribution of the products to businesses and the general public.

The oil and gas industry is one of the largest sectors in the world and a huge factor in the global
economy. But just like any other industry, it can also be very fragile and prone to volatility. With
all the things recently happening between two major oil producers, there’s a call of ramping up oil
and gas production to avoid shortages and prevent the prices from increasing further.

Process of Oil and Gas Production

The process of oil and gas production is divided into three major stages or activities namely
upstream (exploration and production), midstream (transportation and processing), and
downstream (distribution and sale to end users/consumers). Each stage is regulated and laws can
vary per locality or state. There are also international agreements that have to be observed and
complied with.

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Stage 1: Upstream
Upstream refers to the primary process of the oil and gas production that includes exploration,
drilling, and extraction.

Exploration
This is the initial part where geologists and other industry experts search for rock formations or
areas where oil and gas are commonly found. After a site is selected, it will be prepared and
developed for the actual production process.

Drilling
The well drilling process and timeline can vary depending on the techniques and equipment used
in the procedure. Normally, it takes about two to four weeks, but drilling an offshore well can last
for several months.

Oil and gas are commonly drilled vertically but using newer technologies offered various
advantages such as time-saving opportunities, lesser operating costs, and reduced negative
environmental impact. New drilling techniques include: horizontal drilling, multilateral drilling,
extended reach drilling, and complex path drilling.

Extraction
Oil and gas extraction generally includes the actual process of extracting conventional oil and
natural gas from underground reservoirs and wells. This is also the step where fracking and
recycling of fracking fluid is done.

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Stage 2: Midstream
As the secondary stage, midstream mostly refers to the processing, storing, and transportation of
oil and gas products.

Processing
This is the midstream stage where oil and natural gas are separated, then transferred to the gas
processing plants where unnecessary products and nonhydrocarbon gases are removed.

Storing or storage
Proper storage of the products is essential to keep up with the domestic and international demand,
prevent shortage and discrepancies in supply, and ensure safety for all the workers and people
involved in the industry. Natural gases are usually stored in underground spaces such as depleted
reservoirs, while finished oil products, crude oil, and refined oil commonly use above ground tanks
as storage. Both incoming crude oil and the outgoing final products are stored temporarily in large
tanks on a tank farm near the refinery. Pipelines, trains, and trucks carry the final products from
the storage tanks to locations across the country.

Transportation
Transportation is an all-encompassing process for the industry. It starts from when oil and gas are
extracted and brought to the processing plants, transferred to companies and businesses across the
nation and to other countries, and finally to the general public or primary consumers.

Unrefined oil is transported via tankers and pipelines, while final petroleum products travel to the
market through trucks, railroad cars, tankers, and more pipelines.

Stage 3: Downstream
Downstream refers to the third stage and final process of refining and distribution of petroleum
products.

Refining
Refining is the process of converting oil and natural gas into finished petroleum products that can
be used for various reasons such as transportation and electricity fuels, asphalt and road oils,
kerosene, or as raw materials for making plastic and synthetic materials. Petroleum refineries
convert (refine) crude oil into petroleum products for use as fuels for transportation, heating,
paving roads, and generating electricity as feedstocks for making chemicals. Petroleum refineries
are complex and expensive industrial facilities. Refining breaks crude oil down into its various
components, which are then selectively reconfigured into new products. All petroleum refineries
have three basic steps in oil refining process, which are separation, conversion, and treatment
(Finishing and support)

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Fig. 1. An overview of refinery processes and products

Basic steps of oil refining process

1. Separation
Modern separation involves piping crude oil through hot furnaces. The resulting liquids and vapors
are discharged into distillation units. All refineries have atmospheric distillation units, but more
complex refineries may have vacuum distillation units.
- Distillation
Crude oil is made up of a mixture of hydrocarbons, and the distillation process aims to separate
this crude oil into broad categories of its component hydrocarbons, or "fractions." Crude oil is first
heated and then put into a distillation column, also known as a still, where different products boil
off and are recovered at different temperatures.

Inside the distillation units, the liquids and vapors separate into petroleum components, called
fractions, according to their boiling points. Heavy fractions are on the bottom and light fractions
are on the top.

The lightest fractions, including gasoline and liquefied refinery gases, such as butane and other
liquid petroleum gases (LPG), gasoline blending components, and naphtha, are recovered at the
lowest temperatures. They vaporize and rise to the top of the distillation tower, where they
condense back to liquids.

Medium weight liquids, including jet fuel, kerosene, and distillates such as home heating oil and
diesel fuel), stay in the middle of the distillation tower. They are also called mid-range products.

Heavier liquids, called gas oils, or residual fuel oil separate lower down in the distillation tower,
and the heaviest fractions with the highest boiling points settle at the bottom of the tower. They
are recovered at temperatures sometimes over 1,000 degrees Fahrenheit.

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The simplest refineries stop at this point. Although not shown in the simplified diagram above,
most refineries in the United States reprocess the heavier fractions into lighter products to
maximize the output of the most desirable products using more sophisticated refining equipment
such as catalytic crackers, reformers, and cokers.

The diagram below presents a simplified version of the distillation process. A crude oil refinery is
a group of industrial facilities that turns crude oil and other inputs into finished petroleum products.
A refinery's capacity refers to the maximum amount of crude oil designed to flow into the
distillation unit of a refinery, also known as the crude unit.

Fig. 2. Crude oil distillation unit and product

2. Conversion
After distillation, heavy, lower-value distillation fractions can be processed further into lighter,
higher-value products such as gasoline. At this point in the process, fractions from the distillation
units are transformed into streams (intermediate components) that eventually become finished
products.

The most widely used conversion method is called cracking because it uses heat, pressure,
catalysts, and sometimes hydrogen to crack heavy hydrocarbon molecules into lighter ones. A
cracking unit consists of one or more tall, thick-walled, rocket-shaped reactors and a network of
furnaces, heat exchangers, and other vessels. Complex refineries may have one or more types of
crackers, including fluid catalytic cracking units and hydrocracking/hydrocracker units.

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Cracking is not the only form of crude oil conversion. Other refinery processes rearrange
molecules rather than splitting molecules to add value.
3. Treatment
The finishing touches occur during the final treatment. To make gasoline, refinery technicians
carefully combine a variety of streams from the processing units. Octane level, vapor pressure
ratings, and other special considerations determine the gasoline blend.

In general, a simplified flowchart of crude oil refining is shown below

Fig. 3. Simplified flow chart of crude oil refinery processes

Distribution
As the name suggests, distribution is the final step where the finished petroleum products are
transported and distributed to businesses, government agencies, and to the general public
composed of industrial consumers, electrical providers, and heating of residential and commercial
establishments, among others.

Oil and gas processing

Oil and gas wells produce a mixture of hydrocarbon gas, condensate or oil; water with dissolved
minerals, usually including a large amount of salt; other gases, including nitrogen, carbon dioxide
(CO2), and possibly hydrogen sulfide (H2S); and solids, including sand from the reservoir, dirt,
scale, and corrosion products from the tubing. The purpose of oil and gas processing is to separate,
remove, or transform these various components to make the hydrocarbons ready for sale. The goal
of Oil processing s to produce oil that meets the purchaser’s specifications that define the
maximum allowable amounts of the following:

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- Water
- Salt, and
- Other impurities

Similarly, the gas must be processed to meet purchaser’s water vapor and hydrocarbon dewpoint
specifications to limit condensation during transportation.

For the hydrocarbons (gas or liquid) to be sold, they must be:

• Separated from the water and solids
• Treat the oil or gas to meet sales specifications
• Measure and sample the oil tr gas to determine its value
• Transported by pipeline, truck, rail, ship, railroad car, or ocean tanker to the user

A production facility's job is to separate the well stream into three components, commonly referred
to as "phases" (oil, gas, and water), and then process or dispose of these phases in an
environmentally safe manner. In mechanical devices called "separators" gas is flashed from the
liquids and "free water" is separated from the oil. The gas must be treated for sales or disposal. In
the past, disposal sometimes meant flaring or venting, but now gas that can’t be transported is
usually compressed for reinjection into the reservoir.

Natural Gas Processing

Oil and gas wells produce a mixture of components, including oil, gas, condensate, water, salt,
nitrogen, carbon dioxide, solids (such as sand, dirt, scale and corrosion products from the tubing).
One of the key distinctions between gas and oil is that gas contains a lot of relative impurities in
its composition. It is therefore necessary to process such constituents in order to transform oil and
gas into hydrocarbon forms ready for commercial use. Accordingly, gas needs to be processed in
order to remove some of its impurities before it can be used.

The typical composition of gas can be found below. The composition itself can vary depending on
the source and form of gas e.g., some types of gas have a higher proportion of propane and butane.
Methane 94%; Ethane 4%; Propane 0.5%; Butane 0.15%; and Pentane 0.07%.

There are four main examples of sources and forms of gas:

• Associated gas: this is natural gas found in association with oil within a reservoir. This gas can
be burnt off in gas flares or processed to be used for products.
• Non-associated gas: this type of gas comes from reservoirs containing only natural gas and no
oil.
• Rich gas: this is a type of natural gas which contains heavier hydrocarbons than a lean gas i.e.,
higher concentrations of propane and butane.
• Natural gas liquids: these are components of natural gas that are separated from the gas state in
the form of liquids. Its liquid content adds important economic value to developments containing
this type of fluid. The separation occurs in a field facility or in a gas processing plant through
absorption or condensation. Natural gas liquids are further classified based on their vapour
pressure:

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• Low = condensate
• Intermediate = natural gas
• High = liquefied petroleum gas i.e., propane or butane

Given the varying compositions of gas and the requirement to process gas to remove impurities,
there are a number of different uses including heat, power generation, transportation, fertilizers,
plastics, adhesives, solvents, chemicals and fabrics such as polyester and nylon.

The removal of ethane, propane, butane and other heavier components from a gas stream is referred
to as "gas processing." They can either be fractionated and marketed as "pure" components or
blended and sold as a natural gas liquids mix, or natural gas liquid (NGL). The aggregated
petroleum produced in various wells is first gathered through small diameter gathering lines, which
eventually deliver natural gas to designated processing plants and separation facilities. The
objective of the separation facility is to separate natural gas and water from the crude oil that was
extracted from the production wells.

Once gathered and separated, processing occurs through the extraction of implanted NGL, the
removal of water vapour and impurities and the compression (to strip of NGLs) (pentane and
heavier molecular weight hydrocarbons) and dehydration (to remove water) of natural gas as well
as the removal of hydrogen sulphide and carbon dioxide.

In a gas processing plant, the first step is to separate the components to be recovered from the gas
into an NGL stream. It may then be necessary to fractionate the NGL stream into ethane, propane,
iso-butane, or normal-butane liquefied petroleum gas (LPG) components. NGL is mostly
composed of pentanes and heavier hydrocarbons, with some butanes and extremely minor
quantities of propane thrown in for good measure. It cannot contain heavy components that boil at
more than 375°F. In most cases, gas processing plants are built because it is more cost-effective to
extract and sell liquid products, despite the fact that this reduces the heating value of gas. The
increased volume of liquids sales might be worth substantially more than the money lost from gas
sales due to a fall in the heating value of the gas.

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Fig. 2. Simplified schematic representation of a gas processing plant

Oil and Gas Transportation

Before transportation, crude oil and natural gas are often processed to remove impurities. Storage
facilities, such as tanks and underground caverns, are used to hold these products until they are
needed.
Modes of Transportation
1. Pipelines. The most common and efficient method for transporting oil and gas over land and
sea. They can carry crude oil, refined products, and natural gas.
2. Tankers: Large ships designed to transport liquid cargo, primarily crude oil, across oceans and
seas.
3. Rail or railroads cars: Trains equipped with specialized tank cars used for transporting crude
oil and refined products.
4. Trucks: Used for short distances, especially for distribution to refineries and end-users.

Gas is usually restricted to pipeline transportation but can also be shipped in pressure vessels on
ships, trucks, or railroad cars as compressed natural gas or converted to a liquid and sent as a
liquefied natural gas (LNG).

Engr. Dr. Jeffrey O. Oseh