Exam 1 Study Questions 2 Flashcards
What are the three largest shale oil plays in the US?
Eagle Ford, Bakken, and Permian Basin
What are oil sands
Deposits of sand, clay, water, and bitumen
Natural gas can be cooled to -260 degrees F to form a liquid, which enables it to be shipped via tanker. This form of natural gas is known as:
LNG
A light sweet crude will have a ____ API and ____ percent of sulfur
higher; lower
In 1985/86, Saudi Arabia’s jettisoning of the swing producer role and adoption of netback pricing triggered ____ in oil prices
a sharp decrease
The EIA estimates that ___ % of total energy needs will be met by oil, gas and coal in 2040 as compared to ___ actually used in 2011. Renewable energy is forecast to increase from about ___ in 201 to ___ % of total demand in 2040.
87, 77. Renewables: 9, 13
Which renewable fuel is expected to provide the greatest percentage of our energy needs in 2040 in the US?
Biomass; corn based ethanol is largest one currently in use
___ is the cleanest, quickest, and most cost-efficient way to extend today’s energy supply in the future.
Energy efficiency
The least and most expensive oil transportation methods are: ____ is least expensive and ____ is most expensive.
Tanker, semi-truck
the two main NGL markets in the US are in ____ and ____
Mont Belvieu, TX and Conway, KS
3 processing categories of primary refining units
Distillation, Conversion Process (cracking and non-cracking), and Treatment and Blending
a physical separation process that does not alter the molecular structure of hydrocarbons
Distillation
Involves cracking and non-cracking of hydrocarbon molecules, and may involve heat, pressure, and catalysts
Conversion processes
Final stage and may involve adding MTBE to gasoline to increase the octane level
Treatment and blending
“sweet” or “sour” refers to the amount of ____ in the crude oil
Sulfur
What are the largest investor owned companies for providing natural gas based on reserves and production
Exxon Mobil and ExxonMobil based on proven reserves and production, respectively.
What are the 3 prices associated with marketing petroleum products
Spot, wholesale, and retail
Which is not a major finished petroleum product from refining?
Methane
What are the 3 specific petrochemicals from Stage 1 that form the foundation of the industry?
Ethylene, propylene, and benzene
Commodity chemical prices are more cyclical than specialty chemical prices. T or F?
TRUE
In recent years, petroleum dropped from 97% of the total energy use in the transportation sector to 92.8%. This was due to an increase in the use of what?
Biofuels and natural gas
Why has propane usage remained strong in the residential sector while heating oil usage has declined?
Propane is more versatile, has more uses in homes, and is more ideal for rural residences than heating oil
Sharply higher oil prices can be a major contributor to what?
Recessions
Name the 7 basic finished products from refining in order of LIGHTER to HEAVIER
LPG, Gasoline, Kerosene, Distallate fuel oil, Residual Fuel Oil, Petroleum coke, Asphalt/bitumens and road oil
Which type of accounting method is considered more conservative
Successful efforts
Generally, a ___ % of PUD’s on a company’s financial statements is considered ___ conservative
lower/ more
When determining the amount of PUD’s a company has, the study considers the use of an ___ engineer to be ___ conservative
outside/ more
Under SE method, all exploratory dry holes are
expensed
Which 3 of the 11 accounting concepts are of prime importance in understanding financial reporting in the oil and gas industry?
Realization, matching, cost
The ceiling test limitation is of greater concern for companies using which of the accounting methods?
Full cost
What are the 3 principal feedstocks for the chemical industry?
Naptha, natural gas, and natural gas liquids
Which of the following are required to be disclosed for public companies in the 10-K reports?
Proven oil and gas reserves
Over the last decade, if the US would have reduced CO2 emissions to 0, global CO2 emissions would have done what over the same decade?
Increased by 7%
What are the two basic laws of thermodynamics?
- Energy is neither created nor destroyed, 2. In a closed system, heat energy tends toward randomness
Which of the following questions can be answered by one of the reserve ratios in Chapter 9?
How long will reserve last?
The Finding Cost Ratio measures a company’s ability to continue to operate in the future by measuring the extent to which a company is replacing the reserves it is producing. T or F?
FALSE
3 facts about Current ratio
- Calculated by dividing current assets by current liabilities,2. Shows how well the company is able to meet short-term financial obligations, 3. Higher ratio is better and indicates greater liquidity
When and where was the first commercial oil well drilled in the US?
1859; Titusville, Pennsylvania
Who are the Seven Sisters?
Anglo-Persian, Gulf Oil, Exxon, Texaco, Royal Dutch Shell, Chevron, Mobil
Who are the new Seven Sisters
China, Russia, Iran, Brazil, Benequela, Malaysia, Saudia Arabia
What does “petroleum” mean
from the Latin words petra, or rock, and oleum, oil
3 elements a trap requires
- A porous reservoir rock to accumulate the oil and gas, 2. An overlying impermeable rock to prevent the oil and gas from escaping, 3. A source for the oil and gas, typically black waxy shales
Two main types of traps
- Structural: formed by earth’s movement’s that fold the rock into suitable shapes, 2. Stratigraphic: combo of rock types deposited
3 general properties of reservoirs
Porosity, Permeability, and Reservoir homogeneity
Proved reserves (P90 or 1P)
90% probability that at least the proved reserves will be recovered; required to disclose
Probable reserves (P50 or 2P)
50% probability that at least the proved + probable reserves will be recovered
Possible reserves (P10 or 3P)
10% probability that at least proved + probable+ possible reserves will be recovered; largest volume
How is crude oil classified?
According to Weight (Density) and Sulphur Content
US benchmark for natural gas
Henry Hub index in Louisiana
First true gusher
Spindletop (Texas) in 1901 known as the Lucas Well
holds the tools and measuring devices while the blow-out preventer controls fluid pressure
bottom hole assembly
speed at which pressure forces the oil upwards into the borehole
flow rate
heavy, viscous oil that combined with water, clay, and sand produces oil sands
bitumen
The second oil price shock
1979/1980- The Iranian Revolution followed by the Iran/ Iraq war. Triggered tripling in prices.
The third oil price shock
1985/1986- Saudi Arabia’s adoption of netback pricing. Triggered drop in prices.
Oil chokepoint that is 4 miles wide and connects the Persian gulf with the Gulf of Oman and the Arabian Sea
Strait of Hormuz
Oil checkpoint that connects the Red Sea to the Mediterranean Sea
Suez Canal, Egypt
Oil checkpoint that connects the Red Sea to the Mediterranean Sea and separates Europe and Asia
Bosporus Straits, Turkey
found in separate accumulations from crude oil
Non associated gas
found in combination with or in solution in crude oil
associated gas
hydrocarbons other than methane are present; rich in natural gas
wet gas
gas that is almost pure methane; minimal liquids
dry gas
gas that contains significant amounts of hydrogen sulphide
sour gas
Oklahoma’s natural gas producing rank in 2012
4
What are the primary 2 NGLs that make up LPG?
Propane and Butane
Method of converting natural gas into liquids for ease of transportation
Gas to Liquids (GTL)
What is the cleanest fossil fuel and why
Natural Gas because it has a low carbon content
Largest importer of LNG
Japan (33%)
Largest exporter of LNG
Qatar (31%)
High level physical trade types
Arbitrage
opportunity for Location/Arb trade (transportation agreements)
Improve margin by moving product to another market
opportunity for Quality trade (storage & blending capabilities)
Improve margin by blending products to create a higher valued product
opportunity for Timing trade (storage capabilities)
Improve margin by holding product until prices increase
Newer refining technique that uses chemical processes on some of the fractions
Conversion
Distribution and sale of refined products
Marketing
World’s largest refiner
ExxonMobil Corp.
3 major classes of hydrocarbons
- Paraffins- saturated chains, 2. Naphthenes- saturated rings, 3. Aromatics- unsaturated rings
What hydrocarbons make up crude oil
83-87% Carbonm 11-15% Hydrogen, 1-6% Sulfur
Light crude
greater than 30 API
Intermediate crude
22 to 30 API
Heavy crude
less than 22 API
Refineries are categorized by ___ and ___
size (measured by crude distillation capacity) , configuration (level of sophistication and complexity)
How is complexity measured
The Nelson Complexity Index assigns a complexity factor to each piece of equipment based on complexity and cost. Ex: complex refinery will have an index of 13
3 categories of petroleum products
- Light distillates (LPG, naphtha, gasoline), 2. Middle distillates (kerosene, diesel), 3. Heavy distillates (heavy fuel oil, lubricants, asphalt, petroleum coke)
Refinery profit drivers
-Raw material & input costs-Refinery configuration-Reliability & efficiency-Product value
Linear programming (LP)
computer simulation to optimize refinery operation
How to find the refining margin
Value of products - cost of crude - costs of refining = refining margin
Used by refineries and industry stock analysts to assess the general profitability of a given market
crack spreads
Most important component of downstream profitability
Marketing
Spot price
aka refinery gate pricing or bulk pricing; lowest price paid for refined products
Wholesale price
majority of refined products sold pass through wholesale distribution network; wholesale margins and prices vary directly with spot prices
Retail price
oil companies distribute fuel to wholly owned and operated company sites or to independent dealers.
The Realization concept
Revenue should be recognized only at the time a transaction is completed
The matching concept
revenues should be matched with the corresponding costs of producing such revenues
The cost concept
Cost is the basis for all accounting for an asset, so the accounting entry has little to do with the actual value of the asset
Energy Ratios
- Production Ratio 2. Reserve Life Index 3. Production Replacement Ratio 4. Finding&Development Reserve Ratio 5. Reserve Replacement Cost Ratio 6. Finding Costs Ratio 7. Lifting Costs 8. Value of Proved Reserves Additions 9. Value Added Ratio
he 9 Energy Ratios can be broken up into 3 Separate Categories which are:
Reserve Ratios, Reserve Cost Ratios, Reserve Value Rations
Production Ratio
Production/Reserves
Reserve Life Index
Reserves/Production
Production Replacement
(Change in reserves + Production)/Production
Finding And Development Reserve Ration
(Extensions & Discoveries + Improved Recovery + Reserve Revisions)/production
Reserve Replacement Cost
Costs Incurred/(Revisions+Improved Recovery + Extensions& Discoveries+Purchases)
Finding Cost Ration
exploration cost/(extensions & Discoveries)
Lifting Costs Ratio
Total Lifting Costs/Annual Production
