PETROLEUM INDUSTRY

STRUCTURE
Outline
1. Oil and Gas Value Chain
2. Petroleum Companies Types:
- International Oil Companies (IOCs),
- Nation Oil Companies (NOCs),
- Independent Oil Companies,
- EPC Companies,
- Service Petroleum Companies,
- Distributor Companies,
- Refinery Companies,
3. OPEC
INTRODUCTION
• The petroleum industry is quite complicated.
• Part of what makes it so complicated is the fact that most of the world’s oil supplies are control by
state agencies and not by private corporations.
• The somewhat complicated and intertwined operations of these major industry players can make it
difficult to understand why the industry works as it does.
Oil &Gas Chain
Oil Company
Upstream Midstream Downstream
International Oil Companies
International oil companies (IOCs) are vertically integrated companies with global
operations spanning the entire oil and gas value chain. They rank among the world’s
largest corporations in terms of revenue.

• Royal Dutch/Shell, an Anglo-Dutch company created by the merger of Shell and

Royal Dutch.
• Exxon Mobil, an American company formed by the merger of Exxon and Mobil.
• BP, a British company formed by the merger of British Petroleum and Amoco.
• Chevron, an American company created by the merger of Chevron (formerly SoCal)
and Texaco.
• Total, a French company formed by the mergers of Total, Fina and Elf.

As a group, supermajors control 6% of the world’s oil. Comparatively NOCs control 88% of the world’s oil.
Six supermajors are as folows:

Industry segments of IOC:

National Oil Companies
Most of the leading producing countries have a national oil and gas company, majority-owned by the government,
that is responsible for managing production and defending their national interests in the oil and gas sector. In the
organization of the petroleum exporting countries (OPEC) countries and in some non-OPEC countries, national oil
companies have exclusive or near exclusive control of oil production.
Objective and Characteristics of NOC
1. Wealth Distribution. National oil companies may be involved in redistributing the oil wealth of the nation to the
society in general.
2. Jobs Programs. Although the results vary with the demographic of the country, national oil companies can be
viewed as jobs programs for the domestic economy.
3. Economic Development. National oil companies are also used by their governments as tools in the overall
process of economic development. In some nations, the petroleum industry is the first large economic sector
opened to the world economy. As such, the petroleum industry may be the first to introduce concepts of
international investment contract and property law.
4. Foreign Policy. National oil companies can also be used by their national governments as a tool to achieve
foreign policy goals, leading to direct alliances as well as national oil company to national oil company ties that
can pave the way to political relationships.
5. Energy Security. Broadly based energy security is among the objectives of the national oil companies.
6. Vertical Integration. Although national oil companies in oil-producing nations have their roots in upstream
operations, some are striving to achieve vertical integration.12 On an economic level, vertical integration allows
the national oil company to capture the value added from producing and selling petroleum products.
 The differences
National Oil Company International Oil Company

Man Power Employ only locals Employ international, search for the
best talent in the world

Technology Characterized with lower Leading technology in exploration

technology development and development

Land access right Have right to access the Have to negotiate to get the access
resources

Budget Usually have limited Have bigger budgets

budgets

Risk Less likely to take risk Risk taker

NOCs and IOCs: Same industry, different concerns??
NOC concerns:
IOC concerns:
-- Government bureaucracy
-- Share prices
-- Local politics
-- Investor relations
-- Organizational politics
-- Growth regulatory/legal issues
-- Mission confusion
-- Portfolio management
-- Mandate confusion
-- Efficiency/time technology
-- Management skills
-- Commercial competition
-- Accountability
-- Access to opportunities
-- Managing IOC presence
-- Risk management
-- Access to markets
-- Profitability
-- Access to capital
-- Access to technology
Independents Oil Company
• Independents company are
smaller and not vertically
integrated in the way that many
IOCs and NOCs that operate in a
specific region or country, or
even internationally,
• Independents play a significant
role in the upstream oil and gas
business and typically doesn't
own refining, processing, or
marketing assets to prepare
that oil and gas and then sell the
product directly to end users
• Earth scientist and petroleum
engineer has a big role in these
company
Service and Supply Companies
the service and supply industry means companies that supply oil- and gas-related products and services to the
upstream oil and gas industry. It does not include general deliveries to the petroleum industry (for example hotel,
office, property and telecommunications services). The figures for the international turnover of service and supply
industry include sales through subsidiaries abroad.

• Manufacturers of equipment
• Inspection Company
• Drilling Contractors
• Service Company
• Engineering Company
Oilfield Service Companies
Oilfield services refers to various oil related activities such as exploration, drilling, stimulation, completion, intervention,
and production for the entire life cycle of the well exploration. These services help the operators in exploring and
producing oil and gas from reservoirs by aid in perforation, well logging, well stimulation, zonal isolation, setting tubing
plugs, and sand washing. Companies which provide technical services to operating companies, but do not own the
hydrocarbons that are produced Examples: Baker Hughes, Cameron, CGG, Core Lab, Fugro, Halliburton, ION
Geophysical, National Oilwell Varco, PGS, Schlumberger, Spectrum, Technip, Transocean, Weatherford, etc.

Types of service petroleum companies:

1. Diversified: Schlumberger, Halliburton, Weatherford, Baker Hughes.
2. Equipment: National Oilwell Varco, Cameron.
3. Seismic acquisition: ION, CGG, Spectrum, TGS, PGS.
4. Drilling rigs: Transocean, Noble Corporation, Hercules Offshore, Nabors Industries.
Service Oil Company
Drilling rigs Seismic Acquisition Diversified

Provide drilling rigs and crews Provide technical service

Distribution of Refined Products
1. Refined products are traded in reference to prices at a few key locations in the world.
2. Their prices are set in relation to supply/demand pressures that are specific to the
products markets.
3. Market prices can be used to set transfer prices between a refinery and a distribution
affiliate, so as to understand how much margin is made in both segments.
4. There are three main channels of sale for products from a refinery to the consumer :
i) Retail (or Own Brand),
ii) Wholesale (or distributor), and
iii) Bulk sales.
The wholesale (or distributor) sector supplies to customers in small loads either directly from a
refinery by truck or from a distribution terminal that is fed from a refinery or imports.
Bulk sales are large volume sales that are generally made directly by the refiner or by a large
trading company (e.g., Cargo Sales and Large Consumers). Typical customers would be a
petrochemicals plant or nearby power station.
EPC Definition
ENGINEERING

• Detail design & engineering services for the Project.

PROCUREMENT

• Supply all materials, tools machinery, equipment, facilities, subcontractors, services,

utilities, power, etc for either temporary or permanent use.

CONSTRUCTION

• Multi-discipline construction process start from site preparation to testing &

commissioning.

PROJECT MANAGEMENT

• Management system as a coordination for all 3 things mentioned above in order to

reach objectives of the project.
 EPC PRODUCT

Crane “lifting system” in an offshore

installation.

Regional - Submersible
Offshore rig design, and
Gas Pipe
construction.
EPC Contractors in Indonesia
• Tripatra Engineers & Constructor • Fluor
• Rekayasa Industri • Elnusa Petro Teknik
• JGC Indonesia • Petrosea
• Aker Solution • Gunanusa Utama
• Truba Jurong • Worley Parsons
• J-Ray McDermott Indonesia • Siemens Indonesia
• Thiess Contractor Indonesia • Technip France S.A.
• Leighton • Saipem
• Wijaya Karya • Bechtel Kellogg Brown & Root
• Adhi Karya • Chiyoda International Indonesia
• Amec Berca • Shimizu
• Petrofac • Hyundai Engineering & Contractor
• Inti Karya Persada Teknik
• Reka Patria Ekaguna
• and many others…
Petroleum Refining
• Crude oil must be refined before it can be optimally used.
• Crude oil from the field is a mix of hydrocarbons of different molecular length (all hydrocarbons
contain carbon and hydrogen, but in different compositions).
• Refining is the process through which the various components of crude oil are separated.
• Crude oil must undergo several separation processes so that its components can be obtained and
used as fuels or converted to more valuable products.
• The process of transforming crude oil into finished petroleum products (that the market demands) is
called crude oil refining.
Reliance Jamnagar Refinery, India Onsan Refinery, Ulsan, South Korea
TOP 10 LARGE OIL REFINERIES

Source: http://www.hydrocarbons-technology.com/features/feature-top-ten-largest-oil-refineries-world/
Seven Sisters
NEW SEVEN SISTERS
Now we used the label the "New Seven Sisters" to describe a group of what it argues are the most
influential national oil and gas companies based in countries outside of the Organization for Economic
Cooperation and Development (OECD).
What Affects Oil Prices?
Major Oil Trade Movement
North Sea hub
Oil trade movement affected by
“Brentt”
consumption behavior of each
country, and resource size in
Texas Hub that area.
“WTI”
In general, Oil Trade will start
from Hydrocarbon Region
Countries to less prolific
countries.

Middle
(BP Energy Statistical Review,
East Hub
2015)
Singapore
Hub
Major World Gas Trade

Simillary with gas, it will be

traded from Hydrocarbon
Region to less prolific area.

(BP Energy Statistical Review,

2015)
 OIL PRICE
Oil price mainly controlled by its property,
mainly:
• Sulphur content
• Viscosity
• Other contaminant
Presently, oil in certain oil region will collected in
Region Hub. Due to unique oil character from each
of oil region, the hub set the standard oil
characteristic to be sold from it, therefore Oil Hub
price might different from one to another, this
price called oil index price.

For oil that have different characteristic from Hub Several big notable oil index price:
standard. It might subjected to have discount or
premium. - WTI (South USA Region)
- Brent (North Sea Region)
- Singapore gas oil (SE Asia)
- Dubai Crude (Middle east)
OIL PRICE DYNAMICS
Oil price mainly controlled
by world supply and
demand.

World oil production

controlled by several
major oil producer
country, mainly located in
Oil Region.

Political situation in oil

region might affect oil and
gas production in a
country. As shown in the
graph, that war in oil
region my cause world oil
shortage, made the oil
price rise up to 100usd
pb.
 OIL PRICE TYPE
Wellhead price
In operator point of view, oil sale price might
be controlled operation cost and its phase:
• Well head price
• Cargo price Refinery Price
• Refinery price
• Barge price
• Pipeline price
• Rack price
This price might affect company's profit. The Retail Price
bigger operation cost, the lower company's
profit. Operation
al cost / Cargo
Company lifting cost Price
Revenue World Oil +
= Price -
per barrel Transport
cost
+
Processing
Affected by world + Refinery
supply and demand