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') Tropic of Capricorn (23°27')

SOUTH
PACIFIC
30 30

OCEAN

Great Australian
Bight

SOUTH Tasman Sea

PACIFIC
OCEAN

Scotia Sea

60
Drake 60
Passage

SOUTHERN OCEAN
Antarctic Circle (66°33') SOUTHERN OCEAN Antarctic Circle (66°33')
Amery Ice
Shelf

Bellingshausen Sea
Weddell Sea
Amundsen Sea

Ross Sea Ross Sea

Ronne Ice Shelf

Ross Ross Ice Shelf
Ice Shelf

150 120 90 60 30 0 30 60 90 120 150 180

51

Iraq Kuwait
Saudi Arabia
Iran
Venezuela

Baghdad
1960
 Chapter 4 . About OPEC

The birth of OPEC

I n response to this, five of the largest

oil-producing countries held another
conference on September 10–14,
After OPEC was created, the
governments of OPEC’s Member
Countries began to have more control
1960. This time the venue chosen over their own natural resources. And in
was Baghdad, the capital of Iraq. The the years that followed, OPEC became
countries that attended the conference increasingly aware of the important role
were: Iran, Iraq, Kuwait, Saudi it could play in the global oil markets.
Arabia and Venezuela. These are the
Organization’s Founder Members. That
was when OPEC was born.
Each country sent a delegate:
Fuad Rouhani from Iran, Dr. Tala’at al- THE OPEC LOGO
52 Shaibani from Iraq, Ahmed Sayed Omar
from Kuwait, Abdullah Al-Tariki from The OPEC logo
Saudi Arabia and Dr. Juan Pablo Pérez is the recogniz
symbol of the O able
Alfonzo from Venezuela. rganization. It
the result of an is
international d
competition hel esign
At this Baghdad Conference, the d in 1969. An A
designer, Gertr ustrian
delegates discussed the role of the IOCs ude Svoboda, w
competition w on the
and changes in crude oil prices. The oil- ith her design,
combined the which
producing countries saw an urgent need different letter
Organization’s s of the
to create an organization for the defence name in a roun
This logo is stil ded design
of their most important non-renewable l in use by OPE
C.
natural resource, oil.
Thus, OPEC was established as
a permanent intergovernmental
organization. Its first headquarters were
located in Geneva, Switzerland.
In April 1965, OPEC decided to move
the Secretariat to Vienna, the capital
of Austria. A Host Agreement was
signed with the Austrian government
and OPEC moved to Vienna on
September 1, 1965.
 HE Fuad Rouhani
Head of Delegation, Iran

HE Dr. Tala’at al-Shaibani

Head of Delegation, Iraq

HE Ahmed Sayed Omar

Assistant to the Secretary of State
Ministry of Finance 53
Head of Delegation, Kuwait

HE Abdullah Al-Tariki
Minister of Petroleum
Head of Delegation, Saudi Arabia

HE Dr. Juan Pablo Pérez Alfonzo

Minister of Mines and Hydrocarbons
Head of Delegation, Venezuela
 Chapter 4 . About OPEC

54 June 24, 1965, Vienna, Austria: Headquarters Agreement between the Government of Austria and OPEC,
Dr. Bruno Kreisky, Austrian Foreign Minister, and Dr. Ashraf Lutfi, OPEC Secretary General.

OPEC Headquarters, 1960. Geneva, Switzerland.

OPEC Headquarters, 1965. OPEC Headquarters, 1977.

Dr.-Karl-Lueger-Ring 10, 1010 Vienna, Austria Obere Donaustrasse 93, 1020 Vienna, Austria
 55

OPEC Headquarters, 2009.

Helferstorferstrasse 17, 1010 Vienna, Austria.
 Chapter 4 . About OPEC

Who are the members

of opec?
150 120 90 60

ARCTIC OCEAN

Beaufort Sea Baffin

Bay

Arctic Circle (66°33')

Great
Bear Lake Denmark
Davis Strait
Strait
Great
Slave Lake Hudson
60
Bay
Gulf of Alaska
Labrador
Sea

Lake
Winnipeg

Gulf of
Lake St. Lawrence
Superior Lake
Huron
Lake

OPEC is made up of NORTH

Michigan

Lake Erie
Lake Ontario

PACIFIC NORTH
twelve sovereign nations: six in OCEAN ATLANTIC
OCEAN

the Middle East, four in Africa and

30

Gulf of Mexico

two in South America. Tropic of Cancer (23°27')

Caribbean Sea

Venezuela

Equator
0

Ecuador

There are three cat-

egories of membership: Lago
Titicaca S
AT

56 Founder Members, Full Tropic of Capricorn (23°27')

O

Members and Associate

Members. 30

Founder Members of SOUTH

PACIFIC

the Organization are those OCEAN

countries which attended the Scotia Sea

Baghdad Conference in 1960, 60

and which signed the original agree- Antarctic Circle (66°33') SOUTHERN OCEAN

ment establishing OPEC.

Full Members are all Founder Mem- 150 120 90 60

bers, plus those countries whose applica-

tions for membership have been accept-
ed by the Ministerial Conference.

Associate Members are countries The oil producing capacity of each Member
which do not qualify for full membership Country is different. But when it comes to
(see p. 58 regarding Who can be a mem- making decisions as an Organization, every
ber?), but which are nevertheless admit- country is equal. Decisions must be made
ted under special conditions. unanimously with the agreement of all
Member Countries.
 30 0 30 60 90 120 150 180

ARCTIC OCEAN

Laptev Sea
East Siberian Sea

Chukchi
Sea
Arctic Circle (66°33')

Lake
Ladoga Lake
Onega
60

Bering Sea

Lake
Baikal

Lake Balkhash
Aral
Sea

Sea of
NORTH
Japan
PACIFIC
Yellow
Sea
OCEAN
Iraq Iran
30
East China
Algeria SP Libyan AJ Kuwait Sea
Quatar
Persian
Gulf
Gulf of Oman
Saudi Arabia Tropic of Cancer (23°27')
Red
United Arab
Sea
Emirates Gulf of Philippine
Tonkin
Sea
Bay of
Bengal
Arabian South China
Gulf of Aden
Sea
Sea Andaman

Nigeria Sea Gulf of

Thailand
Laccadive
Sea

Celebes Sea
Gulf of Guinea

Equator Equator
0
Gabon Lake
Victoria

Java Sea
Banda Sea
Lake
Tanganyika
Indonesia Arafura
Lake Sea

Angola Nyasa
Timor
Sea
Grea

Gulf of
t

I N D I A N Coral
SOUTH Carpentaria
Barrier

Sea
TLANTIC O C E A N Re

OPEC Member Countries

ef
Mozambique
Channel
OCEAN
Tropic of Capricorn (23°27')
57
Country Joined OPEC Location
SOUTH
PACIFIC
30

OCEAN

Algeria 1969 Africa

Great Australian

Angola 2007 Africa

Bight

Tasman Sea

Ecuador ** 1973; 2007 South America

Gabon *** 1975 Africa
Indonesia **** 1962 Asia
IR Iran* 1960 Middle East
60

SOUTHERN OCEAN
Iraq * 1960 Middle East
SOUTHERN OCEAN Antarctic Circle (66°33')
Amery Ice
Shelf

Kuwait * 1960 Middle East

SP Libyan AJ 1962 Africa
Nigeria 1971 Africa
30 0 30 60 90 120 150 180

Qatar 1961 Middle East

Saudi Arabia * 1960 Middle East
United Arab
1967 Middle East
Emirates
Venezuela * 1960 South America

* Founder Members
Prof. Ri
ggs ** Ecuador joined OPEC in 1973 and suspended its
membership from December 1992 to October 2007.
*** Gabon terminated its membership in 1995.
**** Indonesia joined OPEC in 1962 but suspended
its membership effective January 2009.
 Chapter 4 . About OPEC

58 Representatives of the five Founder Members at a Board of Governors meeting in the 1960s

Who can be a Member?

O PEC membership is open to
any country that exports crude
oil and which shares the ideals of the
may still be admitted as an Associate
Member.
An Associate Member may be invited
Organization.
to attend any of the Organization’s
A country may become a Full Member if meetings. While an Associate Member
its request to join OPEC is accepted by a may participate in these meetings, it does
three-fourths majority of Full Members not have the right to vote.
(including all Founder Members).
In addition, other oil-producing
If most of the oil a country produces is countries that are not members of
consumed internally—to meet domestic OPEC may also be invited to attend
demand—then it may not be able to Meetings as Observers.
join OPEC. Nevertheless, that country
Keeping
the market Stabilizing
supplied oil markets
T hroughout its 50-year history,
OPEC has seen periods of both
extremely high and low oil prices. Each
O ne of the most important parts of
OPEC’s mission is making sure
that the oil markets remain stable. One
time OPEC has tried to respond in an way that OPEC tries to do this is by
appropriate manner. working to avoid price extremes (when
oil prices are too low or too high).
OPEC does this by coordinating the oil
policies of its Member Countries. Avoiding price extremes—and sudden
changes in prices—is important for
If demand suddenly grows and supplies producers and consumers. When oil
fall short, OPEC can increase its oil prices are too high or too low, problems
production in order to keep the market can be generated for the global economy.
well supplied. On the other hand, if
For example, with extremely high oil 59
demand suddenly falls and supplies grow,
OPEC can slow down production in prices, it costs more to do things—like
order to help maintain a balance in the run a car, operate a machine or make
market. products like plastics.

OPEC’s actions at critical times have But extremely low oil prices also cause
demonstrated the Organization’s ability problems. If the price of crude oil is
to keep the oil market well-supplied too low, then it doesn’t make sense to
during different kinds of unexpected spend money trying to find more oil.
events, such as wars or natural disasters. Investments in projects may then fall.

157th Meeting of the OPEC Conference in session in Vienna, Austria, October 2010.
 Chapter 4 . About OPEC

Organizational Structure
Board of
Governo
OPEC’s B rs
oard of G
composed overnors
of represe is
by Memb ntatives n
er Count ominated
the Conf ries and c
erence. onfirmed
by
fer ence The Boar
The Con ’s suprem
e dm
implemen anages the Secreta
P E C ts the res riat,
e is O
h e C o nferenc ts of Heads of ntry.
Conferen
ce, prepar
olutions o
f the
T
o r i t y. I t consis M e m ber Cou annual bu
dget and
es the Sec
r e tariat’s
auth each ulation
of
l e g a t i o ns from h e f o r m Conferen
ce for app
submits it
to the
De for t s.
i s r e s p onsible g e n e r a l policie The Boar
roval.
It n’s
anizatio ear to d makes d
the Org t s t wice a y reports su
bmitted b
ecisions b
ased on
em e e are
nferenc s. These General. y the Secre
The Co rket condition own repo
The Boar
d also sub
ta r y
ma mits its
look at ings’. rts and re
i n a ry Meet s the activit commend
a tions on
‘O r d
n f e r e n ce hold ed. Conferen
ies of the
Organiza
, the Co n requir
60 t
i o n w h e ce. io n to the
d i t eetin g s
In ad
t r a o r d inary’ M
‘Ex

Economic Commission Board

The Economic Commission Board
(ECB) is a special research body within
the Secretariat. It considers current
market conditions, the situation of the
global economy and forecasts the future
direction of market fundamentals.
The ECB is composed of National
Ministers and Heads of Delegations
with Ecuador’s President, Rafael Representatives from Member
Correa (7th from the right), at Countries, a Commission Coordinator
the 158th Meeting of the OPEC (who is also the Director of the
Conference in Quito, Ecuador, Secretariat’s Research Division) and the
December 2010. Secretary General.
 Information C
enter
The Secretariat
The Secretariat
The OPEC Secretariat is responsible for has an Informat
Centre with ove ion
carrying out the executive functions of r 20,000 volum
including book es —
the Organization, according to the OPEC s, reports, map
conference pro s an d
Statute and under the direction of the ceedings—rela
petroleum, ener te d to
Board of Governors. gy and the oil m
keeps journals arket. It
in Arabic, Engl
German and S ish, French,
The Secretary General is the Chief panish. The In
Centre is open fo rmation
Executive of the Secretariat, as well as to the public an
used by research d is often
the legally authorised representative of ers and studen
ts.
the Organization. He is assisted directly
by the Office of the Secretary General,
a Legal Office and an Internal Auditor.
OPEC’s first Secretary General was HE
Dr. Fuad Rouhani of Iran.
The Secretariat consists of a Research
Division, which monitors, forecasts and
analyzes developments in the global
energy industry. The Research Division
consists of the Departments of Data 61
61
Services, Energy Studies and Petroleum
Studies.
The Secretariat is also made up of a
Support Services Division, which includes
the Departments of Administration and
Information Technology, Finance and
Human Resources, and Public Relations
and Information.
The Secretariat is a
multicultural working THE OPEC SUMMIT
f the
environment. It has employees
h o u gh n o t a formal organ o
T mit
drawn from more than 30 the OPEC Sum
Organization, of
different countries. About Heads of State
brings together iscuss
a quarter of them are from
E C M em b er Countries to d
OP d make
Prof. Rig

importance an
gs

Member Countries. Others are gl o b al

su es o f
international employees. is
co m m en d at io ns to guide the
policy re
The official language of the Organization.
Organization is English.
O P E C S u m m it has proved to
The e group
e a ve ry ef fe ct ive way to mak
b nities
rovide opportu
decisions and p
er s to re vi ew the role of the
for lead
world affairs.
Organization in
 Chapter 4 . About OPEC

Building bridges

G lobal events in recent years have

demonstrated the interconnected
nature of today’s world. It is thus more
ongoing dialogue with other energy
stakeholders under the framework of the
International Energy Forum (IEF).
important than ever to coordinate
Another issue that OPEC considers
actions and work together with others
important for all global energy
when tackling these global challenges.
stakeholders is the role that governments
This is especially true for the oil industry,
and people everywhere have in
which reaches all corners of the Earth.
environmental protection efforts.
There are several issues that OPEC
OPEC Member Countries are
considers priorities for all global
continually looking for ways to work
energy stakeholders. One of these is
with others on this. The Organization
improving communications—through
has participated in environmental
dialogue and cooperation—between oil
conferences and seminars, and has
producers and consumers.
undertaken extensive studies of the
This is especially important in order relationship between the energy sector
62 to avoid market instability. OPEC has and global warming.
always said that avoiding instability and
At the same time, OPEC also supports
preserving market stability can only be
the efforts of its individual Member
achieved by cooperating with other
Countries to do what they can at
non-OPEC oil producers. the national level—such as develop
OPEC regularly meets with these other new technologies that enhance the
major oil producers such as Russia to environmental credentials of oil and
improve the understanding of the oil reduce the environmental impact of
industry and seek appropriate policy activities in the energy sector.
actions. To emphasize their overall commitment
Since it is an organization of oil- to the environment, the leaders of
producing countries, OPEC also meets OPEC Member Countries agreed to
regularly with large oil consumers. In fact, several principles set forth in the ‘Riyadh
OPEC has an on-going dialogue with Declaration’ issued at the conclusion of
the European Union. OPEC also holds the Third OPEC Summit of Heads of
meetings and workshops with China. State held in Saudi Arabia in 2007. In it,
the Heads of State of OPEC Member
In addition, OPEC holds dialogues with Countries agreed that the themes of
other international organizations— stability, sustainable development
such as the International Energy and the environment should guide all
Agency (IEA)—and participates in Member Country initiatives.
 WHAT IS OFID?
The OPEC Fund for International
Development (OFID) is an
institution that provides funding and
How does OPEC help other countries? other support to developing countries
around the world. According to
the agreement establishing OFID,
For decades, OPEC and its Member
all developing countries (with
Countries have found different ways
the exception of OPEC Member
to help poor countries. Much of this
Countries) are eligible for OFID
has been through individual Member
assistance.
Country national funds which have
made donations and aid available to OFID is active in many regions of the
poor countries, through bilateral and world. So far, people in 122 countries
multilateral arrangements. in Africa, Asia, Latin America, the
Caribbean, the Middle East and
Another way that OPEC helps
Europe have benefited from OFID’s
is through the
programmes. These programmes
OPEC Fund for
have included clean water and energy
International
projects; building schools, hospitals
Development
and roads; and developing industry
(OFID), which 63
and expanding trade opportunities.
helps finance
projects with low- These programmes have been
interest loans. financed by low-interest loans that
OFID provides to the public sector
During the First
in recipient countries. OFID also
OPEC Summit in
provides financing for private sector
Algiers, Algeria, held
projects in developing countries,
in 1975, OPEC Member
and provides grants to social and
Countries asked the
humanitarian projects.
international community—
especially developed OFID’s financial resources come
countries—to work from its investments, loans and
together to help respond the voluntary contributions made
to the challenges facing by OPEC Member Countries. By
developing countries. the end of June 2013, OFID’s total
Following this Summit, in January approved commitments stood at US$
1976, OPEC’s Member Countries 15.7 billion (of which US$ 10.1 billion
decided to establish the OPEC Special has been disbursed).
Fund. This later became known as
the OPEC Fund for International For more information, visit
development (OFID). www.ofid.org or write to: OFID,
Parkring 8, 1010 Vienna, Austria.
 Glossary of Terms

API gravity — Developed by the American Petroleum Christmas tree — In the oil and gas industry, a Christmas
Institute (API), the API gravity scale measures how heavy tree is an assembly of valves, dials and other fittings that help
or light petroleum liquids are—its relative density—when control the level of oil, gas and/or water at an oil or gas well. It
compared to water. Although mathematically, API gravity has the very rough appearance of a green Christmas tree with
has no units, it is nevertheless referred to as being measured red decorations.
in “degrees”. When the API gravity is greater than 31, the
petroleum is considered lighter than water; when it is less than Coke / coking — Coke is the product of a refining process
31, it is heavier than water. known as ‘coking’ that uses heat and pressure to decompose (or
‘coke‘) heavy crude oil (or residual oil). It produces a mix of
Benchmark — In general, a benchmark can be anything lighter oils that can then be blended or processed into other
that serves as a point of reference or standard against which products. Petroleum ‘coke’ can even be used as a fuel or as an
other things can be compared, measured or evaluated. In the input in other industrial processes.
oil industry, benchmarks are used to establish the appropriate
price of crude oil and are needed due to the existence of so Cracking — This is a refinery process where heavier,
many different varieties and grades of crude. By referring to more complex forms of hydrocarbons are broken down (or
64 a specific crude oil as a benchmark, traders can determine ‘cracked‘) into lighter and simpler forms by breaking the bonds
the price and value of other kinds of crude. The most widely between carbon molecules. Through this process, higher value
accepted benchmarks in the industry are Brent, Dubai, West hydrocarbon products are produced. Cracking can be done
Texas Intermediate (WTI) and the OPEC Reference Basket by applying heat (thermal cracking), through the application
(ORB) of Member Country crudes. Brent is used to price most of a chemical catalyst (catalytic cracking) or with catalysts and
of the world’s crudes; Dubai is used to price regional crudes hydrogen (hydro-cracking).
from the Gulf; WTI is usually used to price oil in the US.
Crude oil — Crude oil is a mixture of hydrocarbons that
Bitumen — Bitumen is a black, viscous sticky organic liquid exist in liquid form in natural underground reservoirs and
composed primarily of condensed chemical compounds. Often which remain liquid at atmospheric pressure after passing
referred to as ‘asphalt’ or ‘asphalt cement’, bitumen is usually a through surface separating facilities. Substances reported as
by-product or residue that is left after the fractional distillation crude oil include: liquids technically defined as crude oil; small
of crude oil and is the one with the highest boiling point. amounts of hydrocarbons that exist in a gaseous form in natural
Most bitumen contain sulphur and heavy metals such as lead, underground reservoirs but which are liquid at atmospheric
chromium, mercury, nickel and vanadium, as well as other toxic pressure after being recovered from gas.
elements.
Distillate yields — In the refining process, when crude
Booster station — This is a specialized station where oil is compressed and heated, it produces (or yields) different
crude oil received from one main pipeline is pressurized so substances (distillates) at successively high temperature levels.
that it can then be sent to the next destination or terminal for
further transportation or refining. Fractions — This refers simply to the different products
that can be separated or refined from crude oil.
Catalyst — A catalyst is any chemical substance that
accelerates the rate of a reaction without being used up itself in Geoscientist — Geoscientists are experts who look at
the process. In the oil refining processes, chemical catalysts speed and study the physical aspects of the Earth in order to better
up cracking. Catalysts include bauxite, zeolite and silica-alumina. understand the composition of its rocks, underground water
and earth. They are often employed in the search for oil, as well Permeability — This is the condition of allowing
as other natural resources. substances like water to flow into or out of an object. When a
rock is porous and allows oil to accumulate in it or flow out of it
Grades — Grades refers to a way of classifying the many easily, it is considered highly permeable.
varieties of crude oil that exist around the world. The
commonly accepted grades are: Seismic — Anything that has to do with vibrations or tremors
in an object or a body. This is most often used when describing
• Light / Heavy — These terms refer to different grades vibrations in the Earth, which can be naturally occurring (as
of crude oil. Heavy crude has a low API Gravity and a high in earthquakes). In oil exploration, seismic technology sends
proportion of heavy hydrocarbon fractions; light crude has high sound waves that cause underground vibrations, bounce back
API Gravity but a low proportion of light hydrocarbon fractions. to the measuring tools and are then measured and analyzed for
Both heavy and light crudes can also be classified as sour or sweet. signs of oil deposits.

• Sour / Sweet — These are terms used to denote a Sovereign nations — A country or nation that has
given crude oil’s sulphur content. Crude oil with a high sulphur complete political authority over its own decisions and actions
content (0.5% by weight and above) is considered sour; crude is considered sovereign. 65
with a low sulphur content (less than 0.5%) is considered sweet.
Either kind of crude can also be further classified as heavy or Stakeholders — This refers to any number of individuals
light. or groups that have an interest (or a ‘stake’) in some event or
process. It is a term that is often used to refer simply to those
Hydrocarbons — Any organic compound that is made up who stand to benefit or lose from the pursuit of a particular
of only hydrogen and carbon atoms is considered a hydrocarbon. policy or action.
Crude oil is a kind of liquid hydrocarbon.
Upstream / downstream — These are the two major
Intergovernmental organization — An inter­ sectors of the oil industry. The upstream generally refers to
governmental organization is an organization set up by and the exploration and production aspects of the business, and
composed of several governments from any region of the world pertains to all the activities and equipment located in both
who share a common interest. They work collectively and the production train and above the surface by the wellhead.
collaboratively to achieve their common objective and to carry The downstream, in turn, denotes the commercialization
out projects and plans that benefit the organization. of petroleum products, referring to operations after the
production phase — that is, oil refining and retailing, and the
Non-OPEC oil producers – These are countries that distribution of refined products.
produce and export oil but which are not members of OPEC.
Sources: Barron’s Dictionary of Finance & Investment Terms, CFTC
Non-renewable energy — Energy sources which exist Glossary, Energy Information Administration, IMF Terminology
in nature in finite quantities are considered non-renewable
sources of energy. These include coal, natural gas, nuclear Database, Merriam-Webster Dictionary; NYMEX’s Glossary of
energy and petroleum. Renewable energies, on the other hand, Terms, OPEC, Oxford English Dictionary, Schlumberger’s Oilfield
are those energies that are continuously available, such as wind Glossary, The Street, The United Nations.
and solar energies.
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Contributors
Director, Research Division
Dr. Hasan M Qabazard

Head, Public Relations & Information Department

Ulunma Angela Agoawike

Public Relations Coordinator

Zoreli Figueroa

Editor
Mario Fantini

Design and Production Coordinator

Alaa Al-Saigh

Additional input by
Dr. Fuad Siala, Dr. Taher Najah, Dr. Pantelis
Christodoulides, Dr. Mohammad Taeb and
Elio Rodriguez

Additional support was provided by

Ghada Sahab, Diana Golpashin, Diana Khoury,
Andrea Birnbach, Sheila Kriz, Beatrix Mayer-Karolyi
and Yi Wen Huang
Organization of the
Petroleum Exporting Countries
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Second edition
www.opec.org ISBN 978-3-200-02193-8