As the lifeblood of our modern society, crude oil flows through the veins of global economies, fueling progress and powering our daily lives in countless ways. From the gasoline that propels our vehicles to the plastics that shape our world, the impact of crude oil reaches far and wide. In this article, we aim to dig deep into everything you need know about crude oil, explore its versatile applications, economic significance, and the manifold benefits it bestows upon humanity. Brace yourself for a captivating exploration of the invaluable substance that has revolutionized our existence and continues to shape our collective future.
What is Crude Oil?
Crude oil is an underground, naturally occurring liquid comprising hydrocarbons and other organic components from which we generate gasoline, diesel fuel, heating oil, kerosene, liquefied petroleum gas, jet fuel, asphalt base, heating oil, and fuel oils.
Although it is a scarcely distributed natural resource, every country needs it for economic development. Its formation occurs deep underground and in ocean beds and is extractable by exploration and drilling.
Classification of Crude Oil
Crude oil classification takes three forms: geographical location, sulfur content, and API gravity.
Classification by Geographical Location: This type of crude oil classification focuses on the origin of crude oil blends or oilfield locations. A few oil blends in this class are West Texas Intermediate, Brent crude, Bonny Light, OPEC Basket, and Dubai Crude.
Classification by Sulfur Content: This type of oil classification focuses on the sweetness or sourness of the oil. Low-sulfur-content oils are sweet, while sulfur-rich ones are sour. A few blends like Bonny Light, Brent, and WTI are good examples of sweet crude.
Classification by API Gravity: API gravity measures the density of petroleum liquid compared to water. We generally refer to crude oils classified by density as light, medium, heavy, and extra-heavy. However, the API gravity for light crude is greater than 10, so they consequently float on water.
Crude Oil Contracts and Crude Oil Prices
Although demand and supply play dominant roles in oil price determination, the market also responds to other factors, such as global crises and OPEC interference.
Also, there are two types of crude oil contracts: spot and futures. The former is the current market price, while the latter is the price an investor is willing to pay at a future date for the delivery of products by the seller.
Futures and Spot Contracts:
A futures contract is a legal agreement in which the parties agree to buy or sell oil at a predetermined price and date. It helps a buyer when making a buying decision to avoid paying more in the future. Crude oil futures trading is an active and volatile market that requires professionalism to trade successfully.
In contrast, a spot contract is an agreement that involves the buying or selling of a commodity for immediate settlement (payment and delivery) on the spot date. It is a ”buy-now-pay-now” transaction which usually lasts two business days after the trade date.
The main difference between futures and spot oil prices is that futures contracts defer payments and deliveries to agreed-upon future dates, while spot prices are for immediate transactions.
Other Factors Affecting Oil Price
In addition to the spot and futures contracts, other factors influencing crude oil prices include demand and supply interactions, OPEC interference, and natural disasters. Like other commodities in the global market, crude oil also responds to demand and supply.
Another crude oil price influencer is the Organization of Petroleum Exporting Countries (OPEC), a cartel overseeing the oil export interest of some petroleum-producing countries. Although they claim to be protecting the market, they seem to focus more on actualizing the goals of member countries by initiating artificial scarcity in the market and consequently increasing prices.
Additionally, when a natural disaster affects an oil-producing country, oil prices tend to surge because all non-oil-producing countries rely on petroleum for economic growth. However, some natural phenomena may result in an oil price crash. For instance, the COVID-19 pandemic triggered an oil glut resulting in oil prices crashing to the negative for the first time in history.
Importance of Crude Oil
The importance of petroleum includes; global economic growth, power generation, agricultural chemical production, infrastructural development, and many more.
Ultimately, crude oil is a catalyst for global economic growth and a decider of global economic direction. Also, petroleum is the most needed resource globally because most industries rely on it for power generation.
Furthermore, crude oil is the primary source of income for some countries, and it has turned many of them into influential global policymakers.
Let me round off with the importance of crude oil in the agricultural sector. Petroleum has played a dominant role in mechanized agriculture and has maintained its position as the primary source of raw materials for fertilizers, insecticides, and herbicide manufacturing companies.
How is Petroleum Formed
Fossil fuels are the remnants of anciently buried plants and animals. It forms when buried organisms undergo heat and pressure over a long period of time. However, oil formation does not occur within a short period of time but takes millions of years to complete its formation cycle.
Petroleum formation begins when buried organic sediments turn into kerogen and later metamorphose into hydrocarbons after several years of intense heat. Simply put, the buried organisms pass through extreme oxygen deprivation for the transformation cycle to complete.
However, its formation cycle is incomplete if the sedimentary rock has no reservoir for the formed hydrocarbons. Hydrocarbons are organic compounds composed of hydrogen and carbon atoms.
Similarly, other fossil fuels that formed under similar conditions are coal and natural gas.
The Petroleum Exploration Process
Petroleum exploration involves the search for rock formations associated with oil or natural gas deposits, geophysical prospecting, and exploratory drilling. It is a challenging task that demands a series of resources and activities for a rewarding outcome.
Also, it requires the combined efforts of professionals, including geoscientists, petroleum engineers, reservoir engineers, and many others, to achieve the best results. However, if you have an undercapitalized company, you can partner with other exploration and production companies to execute an exploration project.
The starting point for petroleum exploration is obtaining the necessary licenses from the government and having exceptional corporate social responsibility plans for your host community.
Furthermore, to establish the viability of a prospect, you need an exploratory well to avoid passing up golden opportunities. However, petroleum exploration success largely depends on the accurate mapping of the potential reservoirs.
Obtaining License for Crude Oil Exploration
Petroleum exploration starts with obtaining the necessary licenses from the appropriate authorities. However, the process varies from country to country.
Also, solicit total cooperation from your host community because obtaining government licenses may not protect you against local hostilities.
Furthermore, a petroleum exploration license traditionally has a limited lifespan. So, you may forfeit some of the licensed acreages to the government after an agreed-upon number of years.
Also, obtaining an exploration license does not guarantee acreage viability. Therefore, an inviable oil prospect may bring about substantial losses because there will be no reimbursement from the government.
Guide On Locating Oil Deposit
Now that you have obtained your exploration license, what next? Having acquired the needed documents from the government, you should engage regional geologists if you do not have one in-house to explore where you may likely find oil.
However, regional geology may not produce the desired result, as you need to leverage subsurface exploration using seismic reflection to avoid passing up golden opportunities.
Also, you should concentrate your search on sedimentary basins, because they are potential locations for petroleum discovery. For instance, results from the Nigerian Niger Delta and the Gulf of Mexico have proved that sedimentary basins are locations for acreages.
Additionally, look out for naturally occuring seeps and leaks and go for prospects close to acreages with viable oil reserves.
Connecting Potential Reservoir For Petroleum Production
The next stage is to locate a viable reservoir or get the odds on your side when prospecting. You must search out strata with sufficient storage capacity and a fast oil pumping rate by conducting a magnetic survey to know the number of sedimentary rocks in the prospective acreage. Your geologists, with the use of seismic data, can determine the reservoir content, trapped volume, and extractable volume percentage.
Also, with seismic data, geologists can access sufficient data to provide professional advice. However, they need accurate seismic data interpretation for a high success rate.
Oil Well Drilling and Crude Oil Extraction
Oil well drilling is a process whereby a hole is bored using a drill bit to create a well for oil and natural gas production.
You can extract oil onshore and offshore, provided your reservoir is commercially viable. Onshore drilling refers to drilling deep under the ground surface, while offshore drilling refers to drilling underneath the seabed.
How to Prepare for Oil Drilling
Preparation for oil drilling may take several years because it requires a lot of processes. The processes include obtaining relevant papers from the government and getting the geologists to locate a viable reservoir.
Onshore drilling requires a few activities, such as road construction to the drilling site, provision of water, site clearing, and leveling of rough ground.
On the other hand, offshore drilling preparation is different from onshore drilling. However, both require similar tools: exploratory equipment, pumps, storage tanks, and more.
To clarify, you may not be able to commence drilling until your oil platform or rig is ready.
The Drilling Process
First, install a conductor pipe into the ground to provide the initial stable structural foundation for the oil well.
Second, select a drill, identify the exact location of the oil, and commence drilling.
Third, install the casings and apply cement between them and the rock.
Fourth, if you are not using Measurement While Drilling (MWD) technology, periodically check for oil sand as you drill.
Fifth, when drilling hits the reservoir, insert your perforation gun to facilitate a ceaseless oil flow into the well.
Sixth, conduct a viability test and install the pump jack.
Difference Between oil rig and Production Platform
An oil platform is an ocean-based structure with facilities for oil well drilling, crude oil extraction, processing of petroleum extracted from rock strata under the seabed, storage of processed products, and accommodation for oil rig workers.
A typical platform may have several wellheads on the production platform, while directional drilling allows access to reservoirs at different depths and in diverse positions from the production platform.
Also, note that offshore oil platforms are of two types – fixed and mobile. The mobile platforms float on water and are movable, while the production platforms are stationary, with the facilities to extract, refine, and offload into tankers.
Furthermore, let us not forget the drilling ships with drilling derricks, primarily designed to operate in ultra-deep oceans where most semi-submersible platforms cannot function.
On the other hand, an oil rig primarily serves as the platform or structure upon which drilling operations get carried out. Also, it provides the necessary support and workspace for drilling crews and equipment.
While some oil rigs may have limited production capabilities, their primary function is to facilitate drilling activities, such as pipes and casings insertion to extract oil or gas. However, after establishing the well, additional infrastructure and equipment, such as production platforms or facilities, are typically utilized to handle the extraction, separation, and processing of oil, gas, and water.
Crude Oil Transportation
Oil transport refers to various transportation methods, such as vessels, pipelines, trains, and trucks, used for moving oil from the production point to the refineries.
However, the distance between the production point and the POD is essential when deciding which type of transportation to adopt. Although the shipment of crude oil to refineries takes different types of carriage, the choice of carrier depends on where the extraction takes place.
Furthermore, transporting extracted crude oil from the production platform to the refining point is essential in petroleum production. Also, an efficient transport system will solve storage problems and prevent operational hitches in oil platforms.
However, none of the above modes of transporting crude oil guarantees a pollution-free environment.
Crude Oil Refineries and Oil Refining
An oil refinery or petroleum refinery is an industrial process plant purposely built for the transformation and refining of crude oil into more useable products such as gasoline, diesel fuel, heating oil, kerosene, liquefied petroleum gas, jet fuel, asphalt base, heating oil, and fuel oils.
But for the oil refineries, petroleum products will not be available to power our cars and equipment. However, refineries are risky places to work, thanks to fatalities resulting from accidents.
There are four types of refineries – topping, hydroskimming, conversion, and deep conversion refineries. The transformation of crude oil into different petroleum products goes through three phases – distillation, conversion and treatment.
Oil refining begins with distillation, a primary process used in transforming crude oil into various components based on their boiling points, and ends with treatment. Nevertheless, the whole essence of refining is to transform crude oil into a safer state.
| Country | Refinery Name |
| Nigeria | Dangote Refinery |
| India | Reliance Jamnagar Refinery |
| United States | Port Arthur Refinery |
| Singapore | ExxonMobil’s Singapore Refinery |
| Texas US | ExxonMobil’s Baytown Refinery |
| Saudi Arabia | Ras Tanura Refinery |
| United States | Garyville Refinery |
| Algeria | Skikda Refinery |
| South Korea | Yeosu Refinery |
Petroleum Products and Their Uses
Although there are other petroleum products, the most common ones include premium motor spirit, automotive gas Oil, dual-purpose kerosene, paraffin, gas, asphalt, and many more.
Also, the petrol and the industrial gas oil with which we power our cars and trucks are from crude oil. Furthermore, the fuel oil that generates heat to warm homes in cold environments is a by-product of crude.
What Are The Uses of Petroleum
Petroleum is essential for transportation, heating, lighting, and production of lubricants, and it also serves as the primary source of raw materials for the petrochemical industry. Consequently, it offers so many benefits to not only the producers but also the users.
Transportation. Petroleum has succeeded in changing our transportation system in its entirety. Its advent has changed how we move from one location to another and has redefined commerce entirely.
Petrochemical industry. The immense contribution of petroleum to chemical and petrochemical industries cannot be over-emphasized. Moreover, the petrochemical industry obtains most of its raw materials from crude oil, and most of its power generation is from petroleum. Also, they rely on it to produce items such as fertilizer, Plastics, paints, insecticides, perfumes, and many more.
Lubricants. Lubricants are the primary power source for all types of mechanicals, especially the industrial and transport machines. Also, industrial machinery, ships, train, and all road vehicles rely on lubricants for optimum performance. Furthermore, it is an essential by-product of petroleum that has transformed the transportation industry.
Industrial Revolution. But for oil discovery, industrialization may have been a mission impossible. Oil has not only aided the production of goods but also made their transportation to consumers possible.
Heating and lighting: The usefulness of petroleum is not limited to industries alone because it also cuts across homes and offices. Petroleum offers us the needed oil to heat our homes.
A Little Insight Into The Petroleum Industry
The petroleum industry includes the exploration, extraction, refining, transporting, and marketing of petroleum products. As can be seen, it comprises three elements – the upstream, midstream, and downstream sectors.
The Upstream Sector: These involve all crude oil exploration and production activities. The E&P sector is capital-intensive, risk-laden, and prone to severe losses. However, it is a lucrative sector with proven viability records.
The Midstream Sector: As the name implies, it serves both the upstream and downstream sectors. Its primary activity is to transport extracted crude to the refineries for processing.
The Downstream Sector: The downstream sector covers petroleum transformation, marketing, and product distribution. It comprises the refiners, marketers, and distributors that purify, sell, and distribute.
List of Crude Oil Producing countries
Few countries, including the United States of America, Saudi Arabia, Russia, Canada, and Nigeria, have substantial oil deposits that have earned them fame and fortune.
| S/N | COUNTRY | BLENDS PRODUCED |
| 1. | Abu Dhabi | Upper Zakum, Thamama Condensate |
| 2. | Algeria | Algerian Condensate, Saharan Blend etc. |
| 3. | Angola | Cabinda, Dalia, Kuito etc |
| 4. | Argentina | Canadon Seco, Escalante etc |
| 5. | Australia | Barrow, Northwest Shelf Condensate |
| 6. | Australia/East Timor | Bayu Undan |
| 7. | Azerbaijan | Shah Deniz Condensate, |
| 8. | Brazil | Marlim, Rio Grande do Norte |
| 9. | Brunei | Champion, Seria Light |
| 10. | Cameroon | Kole |
| 11. | Canada | Albian Heavy (Athabasca), Terra Nova |
| 12. | Chad | Doba, |
| 13. | China | Daqing, Lufeng |
| 14. | Colombia | Cano Limon, Cusiana |
| 15. | Congo | Djeno, Kitina |
| 16. | Denmark | DUC, Siri |
| 17. | Dubai | Fateh |
| 18. | Ecuador | Napo, Oriente |
| 19. | Egypt | Belayim Blend, Suez Blend |
| 20. | Equatorial Guinea | Alba (Equatorial Guinea), New Zafiro Blend |
| 21. | Gabon | Mandji, Oguendjo |
| 22. | Indonesia | Belanak, Cepu, Cinta |
| 23. | Iran | Azadegan, Doroud, iRan Light |
| 24. | Iraq | Basrah Light, Kirkuk (Netback Price at U.S. Gulf) |
| 25. | Ivory Coast | Baobab, Lion Crude |
| 26. | Kazakhstan | Aktobe, CPC Blend |
| 27. | Kuwait | Kuwait Blend |
| 28. | Libya | Al-Jurf, El Sharara |
| 29. | Malaysia | Bintulu Condensate, Dulang |
| 30. | Mauritania | Chinguetti |
| 31. | Mexico | Isthmus, Maya |
| 32. | Netherlands | Hanze |
| 33. | Nigeria | Agbami, Bonny Light, Brass River |
| 34. | Norway | Balder, Gullfaks Blend |
| 35. | Oman | Oman Blend |
| 36. | Papua New Guinea | Kutubu Blend |
| 37. | Peru | Loreto, Mayna |
| 38. | Qatar | Al Shaheen |
| 39. | Qatar | Dukhan, Qatar Marine |
| 40. | Russia | ESPO blend, Siberian Light |
| 41. | Saudi Arabia | Arab Extra Light, Saudi Arabia Light |
| 42. | Sudan | Dar Blend, Nile Blend |
| 43. | Syria | Syrian Light, Souedieh |
| 44. | Trinidad | Galeota Mix |
| 45. | United Kingdom | Brent Blend, Ekofisk Blend |
| 46. | United States | West Texas Intermediate, Alaska North Slope, Mars Blend |
| 47. | Venezuela | Boscan, Ameriven-Hamaca |
| 48. | Vietnam | Chim Sao, Rang Dong |
| 49. | Yemen | Marib Light (Alif), Masila |