Oil & Gas Industry

Introduction to the Upstream Sector

Agenda

• Oil & Gas Industry Segmentation: upstream and downstream

• Business Cycle
• The Industry in Numbers: reserves, production, consumption
• Useful sources of information

OIL & GAS INDUSTRY – INTRODUCTION TO UPSTREAM SECTOR November 9th, 2011
Before we start…

This is an informal discussion!!!

Powerpoint is just to organize it

OIL & GAS INDUSTRY – INTRODUCTION TO UPSTREAM SECTOR November 9th, 2011
Oil & Gas Industry Segmentation

Upstream
Refers to the searching for and the recovery and production of crude oil and natural gas.
The upstream oil sector is also known as the exploration and production (E&P) sector.
The upstream sector includes the searching for potential underground or underwater oil
and gas fields, drilling of exploratory wells, and subsequently operating the wells that
recover and bring the crude oil and/or raw natural gas to the surface.

Downstream
Refers to the refining of crude oil, and the selling and distribution of natural gas and
products derived from crude oil. Such products include liquified petroleum gas (LPG),
gasoline or petrol, jet fuel, diesel oil, etc.
The downstream sector includes oil refineries, petrochemical plants, petroleum product
distribution, retail outlets and natural gas distribution companies.

OIL & GAS INDUSTRY – INTRODUCTION TO UPSTREAM SECTOR November 9th, 2011
Oil & Gas Industry Segmentation

Upstream Sector

OIL & GAS INDUSTRY – INTRODUCTION TO UPSTREAM SECTOR November 9th, 2011
Business Cycle

Exploration Production
Licensing Prospect Downstream
Drilling Drilling

-Negotiation with - Geological - Infrastructure set- - Full scale project

Governments / characteristics up .
-Field optimization
Individuals (US)
- Seismic evaluation -Uncertainty
-Definition of drilling
- Different types of
- Analysis of program and well
contracts: royalties,
formations and profiles
PSA, service
hydrocarbon
contract, etc
characteristics

Onshore / Offshore

OIL & GAS INDUSTRY – INTRODUCTION TO UPSTREAM SECTOR November 9th, 2011
Business Cycle – Actual Case: Exploration

OIL & GAS INDUSTRY – INTRODUCTION TO UPSTREAM SECTOR November 9th, 2011
Business Cycle – Actual Case: Development

(*)

(*) Floating, production, storage and offloading vessel

OIL & GAS INDUSTRY – INTRODUCTION TO UPSTREAM SECTOR November 9th, 2011
The Industry in Numbers: Reserves

By Country By Company

Source: BP Statistical Review

Total > 2.7 Trillion Barrels of Oil Equivalent

OIL & GAS INDUSTRY – INTRODUCTION TO UPSTREAM SECTOR November 9th, 2011
The Industry in Numbers: Production

By Source
• The three fossil fuels are converging on market shares of 26-27%.
Increasing importance of natural gas.

OIL & GAS INDUSTRY – INTRODUCTION TO UPSTREAM SECTOR November 9th, 2011
The Industry in Numbers: Production

OPEC Role
• The importance of OPEC is expected to grow. As per BP’s projections,
OPEC’s share of global production would increase from 40% in 2010 to
46% in 2030 (a level not reached since 1977).

OIL & GAS INDUSTRY – INTRODUCTION TO UPSTREAM SECTOR November 9th, 2011
The Industry in Numbers: Consumption

Global Consumption
• Oil and Gas accounted for 33% and 23% of global energy consumption in
2010.

OIL & GAS INDUSTRY – INTRODUCTION TO UPSTREAM SECTOR November 9th, 2011
Useful Sources of Information

• BP’s Statistical Review and 2030 Energy Outlook

http://www.bp.com/sectionbodycopy.do?categoryId=7500&contentId=7068481

• Schlumberger’s Oilfield Glossary

http://www.glossary.oilfield.slb.com/

• International Energy Agency

http://www.iea.org/

• Baker Hughes’ RigCount

http://investor.shareholder.com/bhi/rig_counts/rc_index.cfm

OIL & GAS INDUSTRY – INTRODUCTION TO UPSTREAM SECTOR November 9th, 2011