Oil from formation to production

With a consumption of about 94 mb/d (“million barrels per day”) in 2016, oil is the first form of primary energy we use, representing about one-third of global primary energy consumption [1, 2]. Oil security is a crucial issue for most countries, and the commodity is also often subject to geopolitical tensions. To better understand the role of oil in the modern economy and the thorny question of peak oil, an overview of the oil industry might be relevant. This first article on oil will focus on the formation and production of different types of liquids.

Formation of conventional oil

Oil being a fossil fuel, it all starts with millions of years of slow formation. When living organisms such as algae and planktons die, most of the organic matter decays to be rapidly reused by the biosphere, but a small fraction (between 1-3%) gets trapped in sedimentary rocks on the seabed. As a result of plate tectonics, these rocks are slowly buried underneath the ground until ambient temperature reaches between 60°C and 150°C. Then, in the absence of oxygen, the organic fraction of the rock called “kerogen” undergoes a thermal decomposition from which oil, gas and other compounds are produced. When pressure is sufficient, oil migrates to the surface through pores until it gets sealed under an impermeable layer of rock (provided there is one). The formation of oil takes millions of years and most oil deposits existing today were formed in the Mesozoic age (252 to 66 million years ago). So technically speaking, oil is a renewable resource if we can wait dozens of millions of years [3-5]. The type of oil resulting from such accumulation of liquids and gas into a sealed reservoir is what is called conventional oil. Since it is the easiest and least expensive to extract, it has historically been the predominant form of oil produced on Earth. However, an increasing fraction of liquid fuels is coming from Natural Gas Liquids (NGLs) and unconventional oil.

Natural Gas Liquids (NGLs)

NGLs are hydrocarbons produced in gas reservoirs as side products of natural gas (i.e. methane CH4). NGLs are present in gaseous form in the reservoir, but as pressure and temperature decrease, heavier components of these hydrocarbons will condense naturally (i.e. turn into liquids) when they reach the surface. This subset of NGLs is called condensate. Others NGLs composed of the lighter components remain gaseous at the surface but can still be turned into liquids if pressurised. Most of these components are better known generically as Liquefied Petroleum Gas (LPG) [6].

Unconventional oil

In the IEA classification, unconventional oil refers to all the different types of oil that are not formed in the same conditions as conventional oil as per the description above. They require more sophisticated extraction techniques and thus, they are generally much more expensive to produce. They are mainly comprised of tight oil, extra-heavy oil and bitumen, coal-to-liquids (CTL) and gas-to-liquids (GTL).

Oil shale is the name given to sedimentary rocks containing kerogen that has undergone no or only partial thermal decomposition. It can be considered an early form of oil. Once oil shale is extracted using hydraulic fracking, tight oil can be produced from oil shale by “completing” the thermal decomposition at very high temperatures (around 500°C). Economic exploitation of tight oil is harder to achieve as energy yields are lower and even sometimes negative [1, 3, 7].

Extra-heavy oil and bitumen are a type of oil much more dense and “older” than conventional crude oil. If no impermeable seal can retain the vertical migration of oil, the hydrocarbons can leak and end their journey in the soil close to the surface (in sand for instance). Bacteria degrade these hydrocarbons and lose their light volatile fraction which makes them heavy with a texture sometimes close to bitumen. The extraction of these hydrocarbons can require to inject highly pressurised water vapour to smooth the viscous liquid out which reduces the final energy yield. The two most significant oil deposits of this kind are Canadian oil sands in Athabasca and Venezuela's Orinoco heavy oil belt. It takes in the order of $20.000 of investment to extract 1 barrel per day from a conventional oil deposit whereas it takes about $200.000 of investment to obtain the same output with Canadian oil sands [3, 7].

Although it remains insignificant in the world supply, oil can also be synthesised from coal and gas (Coal-To-Liquids or Gas-to-Liquids). The idea of the chemical process is to add atoms of hydrogen to coal to make the hydrocarbon lighter to the point it can turn into a liquid. Conversely, with gas, the idea is to remove atoms of hydrogen to make the hydrocarbons heavier to the point it can turn into a liquid. For example, even though it did not have oil resources, Germany was able to produce oil with a CTL process to fuel its military vehicles during World War II [8].

After extraction, crude oil is refined into different liquid fuels ready for consumption such as petrol for cars or heavy fuel oil for bigger engines. Processing gains account for the increase in volume that occurs during the refining of crude oil. They tend to increase when the input crude oil is heavier [9].



Free statistics on oil production by type of liquid are quite patchy, and liquid classification can evolve. Nonetheless, yearly data have been recovered from the different IEA World Energy Outlooks (from 2007 to 2016) and compiled as plotted on the graph below. Before 2007, the reconstitution is less reliable as the data is reported under different breakdowns. As shown the graph, the production of conventional crude oil has been declining since 2007 (as a matter of fact, it peaked in 2006) and the increasing gap is chiefly being filled by the production of NGLs and unconventional oil.


Elliot MARI

Energy Researcher at Sustainable Energy Network Solutions




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